Which is the Best Method to Get Out of Debt?

Debt. It's crushing you! So, let's look at all the options to paying off debt and determine the best payoff method for you.

Snowflakes and snowballs. Avalanches and blizzards. Brr. I'm getting cold just thinking about it. Terms are fun but what is the best payoff method for getting out of debt? First of all, you are better off when your goal is debt elimination, not just debt reduction. Or, as I like to call it, debt assassination. I have been debt free since 2008 and I can tell you that life is better this way. When it comes to paying off debt, the best way to payoff debt is the one that actually pays it off.

Debt Snowflake

This method is focused on chipping away at debt rather than strategically attacking it. It comes down to making extra payments on things with every extra dollar you have. The belief here is that snowflakes are small and, while individually they may not make a huge impact, when compiled they can make a big dent in that debt. You find this extra money by curbing expenses and nickel-and-diming your debt freedom plan. Something is better than nothing, right? I call this approach the shotgun approach. You are firing little pieces in multiple areas at once and making many holes. 

Debt Snowball

Easily the most well-known payoff method, you simply list your debts from smallest to largest. Then, you payoff the first bill on the list (the one with the smallest balance) and, once it is paid off, capture it's payment and begin rolling it into the payment of the second bill on the list. Mathematically, it may not save you as much but the motivation and momentum are powerful. 

Debt Avalanche

In contrast to the debt snowball, the debt avalanche makes payments based on the things with the largest interest rate. You make payments to the bill with the largest interest rate which tends to be items with larger balances. This may take some time but then you are able to roll that payment into the items on the list with smaller interest rates and gain traction. The perk is you pay less in interest but progress can be very slow and result in throwing-in-the-towel prematurely.

Debt Blizzard

The debt blizzard is a hybrid of the snowball and avalanche. Like the snowball, you pay off the bill with the smallest balance first to get a quick win but then use the avalanche method for the remainder of the debt. The intent is to get you motivated right off the bat by paying something off right away but then gravitate towards focusing on interest rates after that first item is paid off. So, of those four, which is the best payoff method?

You're a Human, Not a Machine

Math is great but if math was the real problem, you wouldn't be in this mess in the first place. Likewise, those who focus on math as the solution are missing the full picture. Behavior is the most important element to any progress in life, including personal finances. You need quick wins, not just a win off the bat.

Consider Your Bottom Line

Your income is your most powerful wealth building tool. The sooner those minimum payments you send out and are in bondage to are released, the sooner they start working for you. Mathematically, paying less interest is nice; but, if I have to wait around to get stuff paid off and see the savings, what's the point? So, the debt snowball is the best payoff method for getting out of debt. In fact, a 20-year Harvard Business Review study published in 2017 proved it with science. It's the method I used to become debt free personally. I have yet to meet someone who got out of debt any other way. The choice is up to you. Hopefully, this has given you some food for thought and will help you find more money to fund your dreams. Are you looking for ways to cut costs? Perhaps you've considered cutting cable? Be sure to check out my Cable Cutting Academy for more information about finding ways to cut costs.

Question: Have you ever used one of these four methods? What has been the most useful to helping you assassinate that debt? Feel free to share your experience. And, if you haven't started your debt snowball but want to know how, it's never too late. Contact me today. 

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