Becoming debt-free: Which method is best for you?
There are a lot of different methods, tips, and tricks that people can use to fulfill their goal of becoming debt free. Two popular ones are the debt snowball method and the debt avalanche method. These two may sound similar, considering their reference to snow and all, but they have pretty significant differences. If you’re on a debt free journey, keep reading to find out which one of these methods might be best for your quest.
Working the snowball method is pretty easy. You will make minimum payments on all of your debts. However, your account with the lowest balance will get extra love. Any extra money that you come across each month will go towards that balance. Once it’s paid off, you’ll take all of the money that you poured into that account and start on the account that now has the lowest balance.
The snowball method is ideal for people that need instant gratification. It can be discouraging to keep making payments but not seeing results. Quickly paying off that first debt will give you the encouragement and motivation to keep it going. There is a special satisfaction in knowing that you’ve paid off one of your debts and are now one step closer to being debt free!
The avalanche method works similarly to the snowball. However, instead of working on the account with the lowest balance, you will work on the account with the highest interest rate. You will apply the same strategy of paying off that first debt. Once that money is freed up, you will apply all of those payments to the account that now has the highest interest rate. Keep it going until all of the accounts are paid!
The debt avalanche method is ideal for people that want to pay off their debts, but don’t want to pay a lot of interest. By knocking out the highest interest debts first, you don’t have those fees lingering around and adding up. You might not see the results of this one as quickly, but in the long run, it will save you money.
All roads lead to rewards
Both the debt snowball method and debt avalanche method have great advantages. One isn’t better than the other. It all depends on the person that is applying the method. The debt snowball method is definitely for you if you’re motivated by results and like to see your progress right away. However, some individuals have more patience and would prefer to save money rather than have instant gratification. In that case, the debt avalanche method is for you. Regardless of which method you choose, you’re to be commended for taking steps toward becoming debt free!