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Collection agencies, banks, personal loans — it might feel like reminders about your debt are everywhere.

If you find yourself struggling for a repayment system, you may feel like you will never get out of debt. The first step in managing debt is understanding what you owe and how you should begin making the necessary payments. Calculating what your debt is costing you and deciding which debts to tackle first can help you get on the track to financial freedom. Check out the below tips for dividing your debts into more manageable segments.

Long- & Short-Term Goals

Some debts are more expensive than others. It is hard to become financially independent if you are forking over hundreds or thousands of dollars in interest every month.

One strategy to reducing debt is paying down accounts with the highest interest rates first. This means you will pay less overall to eliminate that debt, allowing you to save money in the long run. If you really want to tackle high-interest debt the best way, it’s important to look beyond the minimum payment option. When in full debt repayment mode, it’s a good idea to throw as much money as you can toward these expensive debts each month, especially if you have a high balance. As you pay off the highest-interest debt first, you still need to manage your other debts — at least making the minimum payments.

Another strategy for debt repayment is knocking out the smaller balances first. If you are getting frustrated with the process of dealing with several lenders or struggling to stay on the right path, paying down the smallest balances can help you get on track. This will give you a “win” sooner, as presumably you can pay off this smallest debt fairly quickly if you are putting more money toward it.

While dealing with multiple debts can be overwhelming, it is important to decide which payments are long term and which should be dealt with right away. You can switch between these two options at any point — like if you feel you need a quick win or if you decide after a few quick wins that you want to get rid of the highest-interest debt. The important thing is that you are meeting goals to work toward ridding yourself of debt.

Good Debt vs. Bad Debt

Debt takes lots of different forms. Sometimes your decision to borrow isn’t only about how much cash you have, but potential ways to make your money work harder for you. Debt can be considered an investment, like properties that appreciate in value or contribute to your financial health in the long run.

It’s not as simple as some debts are just evil and others are great and you should be fighting to take them on. Any debt can be a good debt or a bad debt, it’s all about how to handle it. Take a credit card, for example. If you pay your balance off every month, never miss a payment and actually make money via cash-back rewards, a credit card can be a “good debt” since you’re essentially getting free money and building good credit at the same time. However, if you constantly max out your credit card, only make minimum payments or regularly forget to pay your bill, a credit card can be a bad debt, costing you more in interest and wrecking your credit score. You can see how your credit cards are affecting your credit scores for free on Credit.com.

Whether you are still working to make all your payments or you have reached a debt-free life, it’s a good idea to stick to the strategy and budget that work for you. Try mapping out your goals on a calendar and tracking your progress to remain motivated. You could enlist a friend or significant other to act as an accountability partner. Giving yourself a small reward each time you pay off a debt may provide you with a much-needed boost. With some planning, patience and perseverance, you will be financially free before you know it — so start dividing (and conquering) that debt!

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