There are two main ways to pay off any sort of debt, one is called the Snowball and the other is the Avalanche. I will be explaining both in detail, no one is the perfect choice and you can also do a mix of the two like I do.
Snowball Method
- Sit down and look all of your debt, it doesn't matter what kind, debt is debt at the end of the day. So collect those credit card bills, car loans, student loans, medical bills, personal loans, and anything else that is a debt belonging to you.
- You will list those from the smallest loan amount to the largest loan amount.
- You will plan on pay paying off those debts in that exact order, smallest to largest.
Avalanche Method
- Sit down and look all of your debt, it doesn't matter what kind, debt is debt at the end of the day. So collect those credit card bills, car loans, student loans, medical bills, personal loans, and anything else that is a debt belonging to you.
- You will list those from the largest interest rate to the smallest interest rate, regardless of the dollar amount.
- You will plan on paying the debt off from the highest interest rate to the lowest interest rate.
Here is a visual example of what it would look like:
Sitting down and seeing how much debt you have or how much you are losing every month for silly financial choices can be disheartening. There is no lying or hiding anything when you do so. Many people say they get sick to their stomach, or that they are in disbelief on how bad they let themselves go. Just know that things will get better when you get a hold of it, and I am rooting for you!
So now knowing the different methods, I know what you're thinking, "Which one should I do?". It has been proven that the Debt Snowball Method has a higher success rate. You will see each debt eliminating much faster in the beginning, which will give you motivation to keep on going. The hardest part of paying off debt is the dedication and motivation to do so. Although the Debt Avalanche Method saves you more money at the end, it can be a daunting process. Which will un-motivate you very quickly, since you feel like you will never get out of the hole of debt.
I hope this is helpful in your 2020 financial goals. I don't know about you, but I know I would rather keep my hard earned money or invest it rather than giving it away to a financial institute for interest. I know it can be hard in this journey, but surround yourself with likeminded people on your debt-free journey. If you don't have anyone around you, social media is a great tool. I love to follow the following hashtags when I need a little push or motivation when it comes to paying off my debt on Instagram:
#debtfreejourney
#debtfreecommunity
#debtfreegoals
#debtfreedom
#womenandmoney
I am sending you all the best vibes on this journey, and keep an eye out on more posts to help you out. I want you to thrive, not just survive!
Con Amor,
Adriana 💕
