How to Start Reducing Your Debt Today and Two Ways to Do This

You can immediately begin decreasing what you owe and increasing what you own by following the information below.

There a several commonly recommended strategies for paying off debt efficiently, including the “Debt Snowball” or the “Debt Avalanche” method.

Here’s an explanation of both strategies:

DEBT SNOWBALL METHOD

How It Works: This method involves paying off debts from the smallest to the largest balance, regardless of interest rates. The idea is to gain momentum and motivation by quickly eliminating smaller debts.

Steps for the Debt Snowball Method:

• • • • List all debts, starting with the smallest balance and ending with the largest.
      • Pay the minimum on all debts except the smallest one.
      • Allocate any extra money in your budget toward paying off the smallest debt as quickly as possible.
      • Once the smallest debt is paid off, roll the money you were using for that debt into paying off the next smallest debt.
      • Repeat this process until all debts are paid off.

Advantages: This method can provide a psychological boost as you see smaller debts disappear quickly, which can motivate you to keep going.

DEBT AVALANCHE METHOD

How It Works: This method involves paying off debts in order of highest to lowest interest rates. You focus on paying off the debt with the highest interest rate first to save the most on interest charges over time.

Steps for the Debt Avalanche Method:

• • • • List all debts, starting with the one carrying the highest interest rate and ending with the lowest.
      • Pay the minimum on all debts except the one with the highest interest rate.
      • Allocate any extra money in your budget toward paying off the debt with the highest interest rate as quickly as possible.
      • Once the highest-interest debt is paid off, roll the money you were using for that debt into paying off the debt with the next highest interest rate.
      • Continue this process until all debts are paid off.

Advantages: This method saves you the most money on interest charges over time, as you tackle high-interest debts first.

The Debt Avalanche Method is my preferred method and the one that I teach in my programs, as I want to save you as much money, as you can.

Choosing between the Debt Snowball and Debt Avalanche methods depends on your personal preference and financial situation.

The Debt Snowball may provide quicker wins and motivate you, while the Debt Avalanche can save you more money in the long run. Whichever method you choose, it’s essential to stick to a budget, avoid taking on new debt, and consider increasing your income, if possible, to accelerate your debt payoff efforts.

Additionally, seeking guidance from a financial advisor can provide valuable insights and personalised strategies to help you get out of debt faster.