Personally, when I hear the word debt, I cringe (except for a mortgage). Debt is evil!
Debt allows us to enjoy the moment yet steals our joy from tomorrow’s hard-earned pay. One of the greatest feelings is enjoying our hard earn money- free from the chain of owing a lender money plus interest, except a mortgage. However, for many, the actual process of paying down our debt can seem long and draining, especially if you are not taking advantage of two simple methods. The debt snowball and debt avalanche are two well-known methods of eliminating debt with a purpose.
The debt snowball is probably the most common method of paying down debt. The debt snowball purposely tackles debt based upon the amount owed. Debt snowball works by listing out your debt- maintaining at least the minimum payments on all accounts. First, you make extra money in your spending plan and focus on paying off the debt account with the smallest balance. Once the balance of the smallest account is paid in full, you then take all of the money that was going towards the smallest balance and place it towards the second smallest balance account. Once this is complete, the remaining debt is a rinse lather and repeat process until no accounts remain.
Debt Avalanche is another debt payoff method. I utilized this method while climbing out of my self-inflicted situation, but this is not a method that works for everyone. Personally, there were times I wanted to give up on this method-but I decided to take my own medicine and saw the process through the end. With the debt avalanche method, you will organize debt based on the highest interest rate. In the same sense of debt snowballing, as one debt is paid off, you begin to focus on the next debt; the debt avalanche process works the same way.
Regardless of which method you choose, strategically tackling your debt not only saves you money from paying off debt sooner, but you also gain financial clarity, and it enhances your wealth mindset.
If you are trying to determine which method is best for your financial situation, schedule your WealthSaver™ consultationwith an Accredited Financial Counselor today.