Debt Be Gone

First let’s take a moment to celebrate your new job!  Kudos to you for finding a role that will allow you to transform your financial future.  Equally awesome is you wanting to focus on paying off debt!  Moving towards debt freedom can seem daunting, however reaching the debt freedom finish line creates a wealth (pun intended) of endless opportunity.  As you mentioned there are multiple strategies you can use to pay off debt – the debt avalanche and the debt snowball are examples.  At Hustle Girl Financial we educate clients on several options and empower them to choose the method that will work best with their “money mindset”, their goals and ultimately which plan will help them stay focused.  Throughout my debt free journeys, I used multiple methods including both the debt avalanche and the debt snowball.  Ultimately whichever method you choose should the be the method that will keep you on track to achieve debt freedom as quickly as possible.  Below I have summarized for you what the debt avalanche and the debt snowball entail including the pros and cons of each.  Please keep us posted as you transform your future and progress towards debt freedom, we would love to cheer you on!

Debt Avalanche Method is a strategy to pay down debt by tackling your debt with the highest interest rate.  Using this method, you would make minimum payments on all of your debts and pay extra or “avalanche” funds on the highest interest debt each month until it’s paid in full.  Once you have paid off this debt, you tackle the next debt with the highest interest using the minimum payment from the first debt and your avalanche funds to pay off the next debt.

          Pros: Some prefer this method because paying off the debt with the highest rate could save you money in the long run by paying less interest fees.

          Cons: Depending on the balance of your highest interest debt it could take you a long time to pay this debt in full.  For some people if it takes a long time before you see progress this could cause you to lose focus and momentum.

Debt Snowball Method is a debt reduction strategy where you payoff debt in order of your smallest balance to your largest balance regardless of interest rate.  Similar to the debt avalanche you would pay the minimum on all your debts and use any additional or extra income as your snowball to pay down the smallest balance.  Once the smallest debt is paid off you roll the minimum payment from the paid off debt plus your snowball to pay off the next smallest balance.  Each time you pay off a debt the snowball grows and gains momentum.

        Pros: Some prefer this method because it can provide a quick win.  Paying off that first debt in full can be very motivating.  It gives confidence that paying off debt is possible!

         Cons: A drawback that many see to this strategy is the additional interest and fees you may pay on higher interest debt.  This could be a particular deterrent if you have large amounts of debt with high interest.

Ultimately there is no right or wrong answer between the two methods.  Managing your financial future is a personal choice, so choose what works for you!

Until next time I wish you love, peace and a whole lot of Hustle!

Sincerely,