In my last blog post, I spoke about planning to get out of debt and how to move forward toward the goal instead of just saying you are going to get out of debt. Part of moving forward and part of the planning stage is deciding which way of getting out of debt is best for you. It is important to note that either way works and whichever one you choose, if you keep going, will get you out of debt. But it is vital to your success that you pick the one that will work for you. And if you pick wrong, you can always switch later on. The most important thing is that you are getting rid of your debt and setting yourself up for building wealth and reaching financial freedom.
So let’s explore the two most popular methods:
Debt Snowball – This is by far the most popular way because you can see immediate progress and quicker progress in order to keep you motivated in the beginning. The snowball method has you listing all of your debts in order – the smallest one to the largest one – and paying them off in that order. This method doesn’t take any math into consideration – it’s all about emotion. You may pay a little more interest depending on your situation, but it won’t be enough to quibble over. And in most cases it will be less simply because you will stay motivated, finds ways to save and earn more and pay your debt off faster than you originally planned.
Debt Avalanche – This method helps all the math nerds out there. The avalanche method has you listing your debts in order by the interest percentage that you pay. The pro of this method is that you can save some money using this method. However, the con of this method is that many times your lowest interest debt can be a large one. Therefore, it may take months or even years to pay off just one debt. It can be a challenge to stay motivated in this scenario.
Let me repeat – the most important thing is that you pay off the debt. Getting rid of the debt is vital to your wealth building journey. It doesn’t matter which method you use – they both work. You want to pick the one that will work for you. I used the snowball method because it was extremely motivating to me when I paid off 4 debts in one month. This helped me to begin to feel freedom and kept me going when the debts got higher and higher and took longer to pay off.
So as you being to develop your plan to get out of debt, take the time to be honest about which plan will work for you. And if neither one suits you, make your own. You need a plan and you need to start taking steps immediately toward getting rid of your debt. Doing so begins your awesome journey to wealth and financial freedom.
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