KeyPoint.Plus

Debt can feel overwhelming, but with a clear strategy, you can regain control and eliminate it faster. Two of the most effective methods for tackling debt are the Debt Snowball and Debt Avalanche approaches. Here’s a breakdown of each method to help you decide which one aligns with your financial goals and personality.

Debt Snowball Method

What is it?
The Debt Snowball method focuses on paying off your smallest debt first, regardless of the interest rate.

How can it be done?

1. List all your debts from the smallest balance to the largest.
2. Make the minimum payments on all your debts.
3. Allocate any extra money toward the smallest debt until it is fully paid.
4. Once the smallest debt is cleared, roll the payment into the next smallest debt.

What is the benefit?
This method provides psychological wins by quickly eliminating smaller debts. It’s especially effective if you feel reluctant or overwhelmed by debt. Each success builds motivation to keep going, making it a great choice for those with multiple smaller or scattered debts.

Debt Avalanche Method

What is it?
The Debt Avalanche method prioritizes paying off the debt with the highest interest rate first.

How can it be done?

1. List all your debts in order of interest rate, starting with the highest.
2. Make the minimum payments on all your debts.
3. Apply any extra money toward the debt with the highest interest rate.
4. Once the highest-interest debt is cleared, roll the payment into the next highest-interest debt.

What is the benefit?
This approach minimizes the total interest paid overtime, making it the most cost-effective option. It’s ideal for those with high-interest debts and a focus on saving money in the long run.

Choosing the Right Method

Both methods are effective, but the choice depends on your financial situation and personal preferences:

• Choose the Debt Snowball method if you need quick wins to stay motivated.
• Choose the Debt Avalanche method if you want to save the most money over time.

Regardless of the method you choose the key to success is consistency and determination. Start today, stick to your plan, and watch as you move closer to financial freedom with every payment.