By Sabrina Karl

If you have multiple debts, creating a plan to eliminate them is one of the most effective moves for improving your financial life. And drafting a personalized plan may be easier than you think, taking just three steps.

First, inventory the debts you have. Record every debt you want to eliminate, listing the amount currently owed, the interest rate you’re paying, and the minimum monthly payment you must make.

Step two is deciding if it’s worth consolidating any of these debts. For instance, if you have multiple credit card debts with double-digit interest rates, you might want to apply for a 0% balance transfer credit card to consolidate multiple card balances into one. Another option is consolidating debts into a personal loan.

In both cases, be careful to understand what you’d be taking on. For instance, a balance transfer card offering 0% interest for 15 months is an excellent deal IF you can pay the balance off within 15 months, but not at all a good idea if you don’t. In contrast, a personal loan will commit you to a fixed monthly payment, so it needs to be one you can reliably make every month.

After any consolidating, step three is deciding between the debt avalanche and debt snowball methods for one-by-one debt elimination. A debt avalanche tackles debts by starting with the one charging the most expensive interest rate. This method will mathematically save you the most money. However, the debt snowball method, in which you pay off the debt with the smallest balance first, can be psychologically more rewarding and therefore easier to stick with.

Sitting down to draft any debt reduction plan will significantly increase your odds of success, as it allows you to set a strategy and then just follow the steps every month.