“Financial freedom is freedom from fear”

- Robert Kiyosaki

Navigating the Avalanche or Rolling with the Snowball?

So, you’ve decided to tackle your debt head-on. Kudos! But now you’re faced with a critical decision:

Debt Avalanche or Debt Snowball? Let’s break it down like we’re chatting over coffee (or herbal tea, if that’s your thing).

The Debt Snowball: Small Wins, Big Momentum

 Imagine you’re building a snowman (or snowwoman, because equality matters). You start with a tiny snowball and roll it around, gathering more snow as you go. The Debt Snowball method is similar:

1. List Your Debts:

Grab a pen and paper (or open a spreadsheet; we’re not picky) and list all your debts. From credit cards to student loans, lay it all out.

2. Minimum Payments:

Keep making those minimum payments on all your debts. No slacking!

3. Attack The Smallest Debt:

Channel your inner superhero and focus on the smallest debt. Pay it off as fast as you can

4. Snowball Effect:

As you conquer each debt, roll that payment into the next smallest one. It’s like a financial snowball gaining momentum.

5. Psychological Wins:

Here’s the secret sauce: Those small victories keep you motivated. You’ll feel like a debt-crushing champion.

Pros of the Debt Snowball:

• Psychological Boost: Nothing beats the thrill of crossing a debt off your list.

• Quick Wins: Smaller balances vanish faster than a magician’s rabbit.

Cons:

• Interest Costs: You might pay more interest overall.

• Not Mathematically Optimal: It doesn’t care about interest rates; it’s all about feelings..

The Debt Avalanche: Efficiency Mode Engaged

Now, let’s switch gears. Imagine you’re an icebreaker ship slicing through frozen debt.

That’s the Debt Avalanche:

1. List Your Debts (Again): Yep, same drill. List 'em all.

2. Minimum Payments (Still): Keep those minimum payments rolling.

3. Target High-Interest Debt: Forget balance size; focus on interest rates. Attack the debt with the highest rate first.

4. Snowball Effect (of Savings): As you pay off high-interest debt, channel that payment toward the next highest rate debt.

5. Long-Term Savings: The Debt Avalanche minimizes the total interest you’ll fork over.

Pros of the Debt Avalanche:

• Interest Savings: You’ll pay less interest over time. Cha-ching!

• Mathematically Optimal: It’s like having a financial GPS.

Cons:

• Psychological Challenge: Discipline required. You won’t get those quick wins.

• Assumes Constant Discretionary Income: You need a steady stream of extra cash.

Which One Is Right for You?

Ask yourself:

1. Motivation: Need those small victories? Go Snowball.

2. Interest Savings: All about the long game? Avalanche.

3. Personal Discipline: Can you resist the allure of quick wins?

**Remember, there’s no one-size-fits-all answer. Some folks love the snowball fight; others prefer the icy avalanche. Whatever you choose, keep chipping away at that debt. You’ve got this! 🌟

Disclaimer: This blog post is for informational purposes only. Consult a financial advisor for personalized advice.

Want help mapping out your debt avalanche or debt snowball plan. Grab your tracker sheets here🔥