Take a moment and think about your finances. How much money do you currently have? Are you swimming in a pool of debt? What are your financial goals?
For many of us, our goal is financial freedom. We want to live a life in which we can purchase whatever it is that we want without worrying about going broke. We also want to live a life that is free of debt. But in reality, a lot of us don’t know exactly how to get out of debt.
We make purchases on our credit cards, pay a minimum balance, then end up using that same credit card again. So how do we eliminate our debt so that we can be financially free?
Well first off, there are two popular methods that people may use to pay off their debt. The two methods are The Debt Snowball Method and The Debt Avalanche Method. Both methods have their pros and cons depending on what your financial goal may be.
With the Debt Snowball Method, you will see progress in eliminating your debt quicker. This happens because in this method, your goal is to pay off your debt with the lowest balance first, while still making minimum payments on your other balances. For example, if you have 2 credit cards, you will pay more than the minimum balance on the card with the lowest balance, while still paying the minimum balance on the card with the highest balance. Once you have fully paid off the card with the lowest balance, you will then begin doing the same on your next lowest balance.
With the Debt Avalanche Method, your goal is to pay off the debt with the highest interest rate first. This may be cost efficient for some because you will pay a lot less in interest by tackling the account that has the highest interest rate, and as we all know interest adds up overtime. Once you have paid off the account with the highest interest rate, you will continue on to the next highest interest rate until you have paid all off your debt off.
Both methods have been effective for many people, it all depends on your financial goals. If you want to see progress in eliminating debt, getting less bills, and don’t mind paying a little more interest then the best method may be the Debt Snowball Method. If you want to pay less in the long run and save on interest, then the Debt Avalanche Method may be best for you. It all depends on your financial goal.
If you want more information on both methods, you can google or watch videos on YouTube to learn more.