There are three top methods for paying off debt: snowball, avalanche, and emotional baggage. When you hear how each one works, you might immediately know which is going to work best for you or you might want to try some of the different methods to see what works best for you. Each of the top methods for paying off debt is going to require you to take a look at all the debt you currently have except the mortgage on your house (if you have a mortgage). Mortgage debt can be treated a little differently than other debt like credit card debt, student loans, car loans, and medical debt.
The snowball method has you list all of your debts from smallest balance to largest. You want to make sure to continue making minimum payments on all debts, but with this method, you put any extra money towards your debt with the smallest balance. Once that smallest balance loan is paid, then you repeat the process by throwing all extra money at your next smallest balance debt. This process can be beneficial for people who want to have a quick win and want to see progress.
The avalanche method is when you list all of your debts from highest interest rate to lowest. This method is good for people who are all about the numbers. If you just consider the math this method makes the most sense, but you don’t feel like you’re making progress as quickly. Once the highest interest loan is paid off, then you can focus on the next highest, again while making minimum payments on all other debts.
The final common debt payoff method is the emotional baggage method. This method has you pay the minimums on all debts and then pay all your extra money towards the debt that you hate the most. So for me, it would have been my student loans. I truly hated them and wanted them gone as quickly as possible. Once you pay off the debt that makes you the maddest, then you focus on the one you hate most next. This method is good for people who just want a certain debt out of their life and want to feel the emotional burden disappear so you can continue kicking all of your debt to the curb.
If one of these methods doesn’t call to you immediately, you might need to pick one to try and then if you aren’t liking it try another. Personal finance is personal so different methods work best for different people. These three top methods for paying off debt are a great place to start.
Other Posts:
Student loan struggle bus — All aboard!
How to painlessly save for your goals