In addition to maximizing your savings and putting together a comprehensive plan, an important task to check off your pre-retirement checklist is minimizing debt. Doing so both quickly and efficiently means paying off as much debt as possible while still protecting your savings.

In this week’s Retire Wiser with NBC Connecticut, Joel Johnson, CFP® shares key strategies for entering retirement with greater financial freedom and less debt.

How Does Debt Fit into Your Budget?

Before creating a plan to pay off your debt, you need to know where you stand financially: How much debt do you have? What type of debt do you have? Where is your debt located? And just as important, what are your current income and expenses?

As you put together a budget, you may find that cutting back on some of those expenses could help you lower your debt and even boost your savings over time.

The Debt Snowball Method

Generally, there are two main strategies to help reduce debt. The best one for you depends on your spending habits and personality.

The first is the snowball method, which involves paying off your smallest debt first. Like a snowball rolling downhill, the idea is to build momentum. As you chip away little by little, each small win gives you the motivation to keep going.

However, the snowball method does not take interest rates into account. This means your high-interest debt may keep growing. As a result, you could end up paying more in total interest over time.

The Debt Avalanche Method

Another option is the avalanche method, where you pay off your highest-interest debt first. Once you pay off that debt, you roll over the extra money to the next highest-interest debt and so on.

Keep in mind that if your highest-interest debt also has a large balance, it might take a while to eliminate your total debt. This can be discouraging and make it harder to stay motivated. But if you have the discipline and the focus, this can be the most financially efficient approach.