Do you want to pay off all your debt?
Does it feel like you keep making payments on your debt, but nothing is changing? If so, it’s time to strategize!
In this article, we’ll explore two popular debt payoff strategies—the debt snowball method and the debt avalanche method. Plus, I’ll even introduce a hybrid approach to suit your individual needs. Whichever method you choose, you can use our FREE spreadsheet template to kickstart your debt payoff journey.
Debt Snowball vs. Debt Avalanche: Which One is Right for You?
The debt snowball and debt avalanche methods are both designed to accelerate your debt payoff journey, but they differ in their approach. The snowball method prioritizes paying off debts with the smallest balance first, providing quick wins to keep you motivated. On the other hand, the avalanche method focuses on tackling debts with the highest interest rates first, saving you more money in the long run.
Apart from determining which debt to tackle first, and the order in which you accelerate each debt, these two methods have a similar strategy: pay the minimum required amount due on every single debt except for one. On one debt–your top priority debt–you’ll add additional payments on a consistent basis.
Introducing the Hybrid Method: Finding Your Perfect Balance
Can’t decide between the snowball and avalanche methods? Why not have the best of both worlds? The hybrid method combines elements of both strategies, allowing you to prioritize your debts based on your personal preferences and financial goals. Here are two ways to approach it:
- Start with the debt snowball method and attack your smallest debt first. Once it’s paid off, re-order your priority debts to be based on the highest interest rate first (debt avalanche method).
- Start with the debt you personally & emotionally want to get rid of first! Do any of these debts feel like an extra burden on you? The magic of a debt payoff plan is often less about the order of the debts you prioritize, but more on having a plan & strategy that you can stick to consistently. (The real magic happens after the first debt is paid off, which we’ll cover shortly!).
Watch the video on YouTube for the full walkthrough:
Crafting Your Debt Payoff Plan: Step-by-Step Guide
Ready to take control of your finances? Follow the simple steps below to create your personalized debt payoff plan. We recommend using our FREE spreadsheet template.
- Gather Your Data: Compile a list of all your outstanding debts, including the creditor’s name, type of debt, outstanding balance, APR or interest rate, minimum monthly payment, and any additional payment amount you can afford.
- Prioritize Your Debt: Choose your preferred debt payoff method—snowball, avalanche, or hybrid—and prioritize your debts accordingly. Assign each debt a priority number based on your chosen method.
- Commit to Your Plan: Determine the total amount you can afford to pay towards debt each month. Allocate any extra payment amounts towards your top priority debt to accelerate its payoff. Here’s the magic we promised: once your first debt is paid off, reallocate your entire would-be payment on that debt towards the next debt. This means that once your first debt is completely paid off, you won’t be changing the “total amount” that you’re paying towards debt every month. Instead of spending this money on discretionary things, you’ll accelerate paying off your next debt. Continue this process until all debts are paid off.
- Track Your Progress: Use our free spreadsheet template to monitor your debt payoff journey. Update your plan regularly and celebrate each milestone along the way.
Bonus Tips for Success
Achieving debt freedom requires discipline, determination, and a few smart strategies along the way. Here are two bonus tips to help you stay on track:
- Master Your Cash Flow: Conduct a cash flow audit to ensure you’re living within your means and avoiding overspending. Cut unnecessary expenses and commit to smarter money habits to accelerate your debt payoff journey.
- Use Debt Payoff Calculators: Take advantage of online debt payoff calculators to visualize your progress and stay motivated. Experiment with different payment scenarios to see how small changes & additional payments can lead to big results. Here’s a simple one we like from CreditKarma.
Conclusion
Paying off debt may seem like a daunting task, but with the right plan and mindset, it’s entirely achievable. Whether you prefer the snowball, avalanche, or hybrid method, the key is to stay consistent, motivated, and focused on your financial goals. Remember, every step you take towards debt freedom is a step towards a brighter financial future.Are you ready to take the first step towards financial freedom? Download our free debt payoff spreadsheet template and start crafting your personalized plan today. Your journey to debt freedom begins now.
