2 Methods to Pay off Your Debt Fast: Which One is Right for You?
Today we're going to talk about getting out of the debt spiral and two methods you can use to get out of consumer debt. I'll go through both of them, and by the end of this, you should be able to decide which method you want to use.
My name is Serena Alfaro, and I'm the founder of Nueva Luxe jewelry brand, which I started at the beginning of 2020. And in January of this year, I quit my full-time six-figure job to focus on building my business full-time along the way. I decided to resurrect my youtube channel and thought it would be an excellent opportunity to talk about money and entrepreneurship. Today we're talking about getting out of debt which is one of the most liberating experiences I've ever had. I used to be thirty thousand dollars in debt, and now I'm up three hundred and eighty thousand dollars, so I know a thing or two about it.
The debt avalanche method and the debt snowball method are both methods you can use to get out of consumer debt. Finally, I'll give you the ways you can do either, and you can make a decision and start getting out of debt once and for all. The debt snowball method is a debt reduction strategy where you pay off your debts from smallest to most significant, gaining momentum along the way. As each debt is paid, the payment that was going towards that debt is then rolled up to the next debt that needs to be paid. You gain a lot of momentum if you use this strategy, and I will give you the step-by-step on how you can employ it yourself.
The debt snowball method is a four-step method.
List all your debts, from the smallest to the largest, regardless of interest rate.
Make the minimum payment on every debt except the lowest one.
Pay the maximum amount you possibly can afford on that smallest debt.
Repeat this process until you've knocked all of your debt out.
This method is excellent because you get that little dopamine hit each time you pay off one of your debts, and if you plan this correctly, you can decide the last date that you'll be making payments on this debt, and that's so exciting, so that's the debt snowball method. I like this method, but I'll also cover the avalanche method.
In the debt avalanche method, what you want to do is list all of your debts from the highest interest rate to the lowest interest rate. These methods are for consumer debt. I'm not talking about your mortgage or something like that. In these scenarios, also know how much cash you have available to make payments, or else you're not going to figure out anything by learning these methods. You must know how much you have to pay for your consumer debt. Okay probably just said that earlier but anyway debt avalanche method list out your debts in order from highest interest rate to lowest interest rate, and you're going to do something similar that we did
In the snowball method, you will pay the lowest payment of the minimum payments on all of your debts except for the debt with the highest interest rate. That debt will get the maximum amount you can make. You will continue that method until you've knocked out your debt. The thing that makes me like the snowball method more is because I like the excitement of getting items paid off the avalanche. The process can work. You have to be a bit more organized with it, and it can take a lot longer before you start seeing things become fully paid, but it is a method many people employ. You can find that avalanche calculator online, too. Please choose a method and stick with it.
Personal preference snowball method, but people use either, and there's a lot of information about both on the internet. I'm going to link you to some tools, obviously because I'm nice.
Earlier, I mentioned I was previously in 30 000 consumer debt, but to be fair, I'd been in and out of debt multiple times before. It wasn't until I changed my mindset about money and spending that I could finally get that under control, and let me tell you, I continued to earn money every year when I graduated college and got a job. Still, I continued to be in and out of debt because my lifestyle kept expanding, so it's a lot of mindset work to get out of debt and change your mentality about money and spending. What gives you a dopamine hit, if you find yourself in this cycle, can you do me a huge favor and fill out the survey I will put in the comments below.
I'm developing a program to help people master their money mindset, get out of debt, start investing, and do all the beautiful things that got me from a negative thirty thousand to over 375 000 ( or however much the money I have now). Mindset is a lot of its earnings have something to do with it I'm not going to say don't buy five-dollar Starbucks. You'll magically be worth a hundred thousand dollars is not good advice, and that's stupid. This is not through crypto forex or anything scammy like that.
So please fill out that survey. It will help me tremendously because it will give me ideas for the content that can help you. That's why I'm here. Five people that fill out this survey will get a financial wellness audit with me for free, and hopefully, I can help you master your money mindset, get out of debt, start investing and start saving. Do all those beautiful things that make you be able to fall asleep at night, not worrying about do I have a credit card payment coming tomorrow. I'm about to be overdrawn; I've been there before. Trust me.