June 13, 2023
I recently ran this poll on social media:
Dealing with debt can be challenging, but with the right strategy, you can make significant progress in paying it off. In this article, we'll explore two popular debt payoff strategies: the Debt Avalanche and the Debt Snowball. Remember, there's no one-size-fits-all solution, so choose the approach that aligns best with your goals and motivations.
The Debt Avalanche strategy garnered the most votes in our social media poll, and it's a sound approach from a mathematical standpoint. By targeting debts with the highest interest rates, you can minimize the overall interest you pay. Let's look at an example using our friends Doug Funnie and Patti Mayonnaise:
By following the Debt Avalanche strategy, you systematically eliminate high-interest debts, saving you money in the long run.
Though not as popular in our poll, the Debt Snowball strategy is widely embraced due to its psychological benefits and early wins. This approach focuses on paying off the smallest debt first, allowing you to experience a sense of accomplishment and motivation to keep going. Here's how it works:
While the Debt Snowball may not result in the lowest overall interest payments, it provides psychological benefits by offering quick wins early in the debt payoff journey.
Ultimately, there is no right or wrong debt payoff strategy. You should select the approach that suits your circumstances and preferences best. Consider the following:
Remember, the most crucial step is to take action and not ignore your debts. Commit to a strategy, stick to it, and you might find yourself debt-free sooner than you expected.
When it comes to paying off debt, finding the right strategy is key. The Debt Avalanche and Debt Snowball approaches offer distinct advantages, and the choice depends on your priorities and mindset. By actively addressing your debts and staying committed to your chosen strategy, you're on the path to financial freedom.
You wouldn't wait until the morning of a flight to plan a trip.
Don't wait until retirement to make a financial plan.