Debt can feel like a heavy weight, but a plan turns anxiety into arithmetic. Once you see the numbers on paper, the monster becomes manageable. We will focus on the two most effective strategies: Snowball (behavioral) and Avalanche (mathematical).

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Creating a debt payoff plan that works

Creating a debt payoff plan that works

TL;DR: List all debts, choose Snowball or Avalanche method, and cut non-essentials temporarily.

Debt can feel like a heavy weight, but a plan turns anxiety into arithmetic. Once you see the numbers on paper, the monster becomes manageable. We will focus on the two most effective strategies: Snowball (behavioral) and Avalanche (mathematical).

Step-by-Step Guide

  1. List every single debt: Write down the creditor, total balance, minimum monthly payment, and interest rate for every debt. Don't hide anything from yourself.
  2. Choose your strategy: **Avalanche:** Pay minimums on everything, put extra cash on the HIGHEST interest rate. Saves the most money. \n**Snowball:** Pay minimums on everything, put extra cash on the SMALLEST balance. Builds momentum faster.
  3. Find 'Gap Money': Review your last 3 months of spending. Find $50-$100/month that can be redirected to debt. Use the Budget tool to formalize this.
  4. Negotiate rates: Call your credit card companies. Ask: 'I am reviewing my finances; is there a lower APR available for my account?' It works more often than you think.

FAQ

Which method is better, Snowball or Avalanche?

Avalanche saves money mathematically. Snowball keeps you motivated psychologically. Choose the one you'll stick to.

Should I use savings to pay off debt?

Keep a small emergency fund ($1000) first. Otherwise, a flat tire will force you back into debt.

What about consolidation loans?

Good if the rate is lower, but dangerous if you run up the credit cards again. Address the spending habit first.

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