Managing Debt

You CAN Get Out Of Debt!

Managing debt is a key way to keep your finances healthy. While most of us take on some debt at different points in our lives, it’s important to crush your debt as quickly as possible.

The Dollar Blogger recommends the debt snowball method as it has the best psychological effect for most, but we recognize that the debt avalanche method is better for some who simply want to save the most money.

Debt Snowball Method Overview

  1. Pay the minimum payments on every debt.
  2. Use the remainder of your monthly take-home pay after bills and allocate it to the debt with the lowest balance.
  3. When the lowest balance debt is paid off, allocate all left over money to your next debt.
  4. Repeat until you're debt-free.
 

The debt snowball method pays off debt sources the fastest because you're always targeting the lowest balance. This has the feel-good psychological effect that you're making steady progress on your debt-free journey.

 

Debt Avalanche Method Overview

  1. Pay the minimum payments on every debt.
  2. Use the remainder of your monthly take-home pay after bills and allocate it to the debt with the highest interest rate.
  3. When the debt with the highest interest rate is paid off, allocate all left over money to your debt with the next highest interest rate.
  4. Repeat until you're debt-free.
 

The debt avalanche method saves the most money because you pay off the highest interest rate debts first. This feels great however if your highest interest rate debts are also your highest balance debts, it may feel like you aren't making much progress at freeing up your money quickly.

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