If you are looking to start out 2023 by getting your debt under control there are two well-known techniques you can use to get on top of it: the debt snowball and the debt avalanche. Both methods are great at getting you fired up as you see your debt melt away. Both the debt snowball and the debt avalanche are similar in how you can approach getting rid of your debt. We’ll start with the debt snowball.
The Debt Snowball Technique
The debt snowball technique to debt reduction is very simple. You write down all of your debts and the amount owing on each one. You can list credit cards, personal loans, school loans, etc.. Once you’ve done this you then list the debts from the smallest amount to the largest. Then you simply attack the smallest debt first.
You’ll pay the minimum amounts every month on your other debts but then throw everything extra that you can to that smallest debt. For instance, say you have three different debts.
Debts to Payoff
Tahiti vacation loan: $2,000
Car loan: $8,000
Home remodel loan: $11,000
In the above scenario you would put any extra money to paying off the vacation loan as quickly as possible. Once that loan is paid off you would then direct any extra funds you could muster to then paying off the car loan. The theory behind the debt snowball method is that once you get one loan paid off it will give you a boost of confidence to go attack the next loan. And, because you have one paid off you should have even more extra money to direct toward paying off the next loan. You’ll start rolling over your debt even faster as the snowball accumulates momentum.
The other method we brought up is the Debt Avalanche.
Debt Avalanche
The debt avalanche method is similar to the debt snowball method except for one thing. With the debt avalanche method you’ll again list your debts but now you’ll list them based on the debts with the highest interest rate that you are paying. For example say you have the debts below.
Debts to Payoff
Department store credit card: 14%
School loan: 8%
Mortgage: 4%
The amount no longer matters. With the debt avalanche method you’ll be attacking the debts with the highest interest first. In the above scenario you would seek to eliminate the department store credit card first. This is a great method because you’ll be paying off the loan where you are getting hit the hardest with interest.
These are just two methods you can use to start to quickly pay down your debts. Both methods should also keep you highly motivated as you are focusing on eliminating one debt at a time. You knock out one debt, feel great and gain confidence, and then move onto knocking out the next debt and so on.
Quick Motivation to Get Debt Free
If you want some quick motivation to start tackling your debt try our 1 minute affirmations video to get debt-free. That page also has all the debt-busting affirmations used in the video. And, if you really want to train your mind to start becoming debt-free that page also has a link to our 1 hour Get out of Debt video on youtube. The quick 1 minute debt-busting video referenced above is part of our free 30 Day Challenge which allows you to watch a different 1 minute motivational video every day. We now have about 90 different quick but powerful videos that you can watch for free. Why not see if you can change your life in just one minute a day?
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may the winds of fortune be with you,
Bob K.
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