Repeat the process until all debts are paid off.<\/strong><\/li>\n<\/ol>\nThis method provides a sense of accomplishment as you quickly eliminate smaller debts, building momentum and motivation to tackle the larger ones.<\/p>\n
Strategy 2: The Debt Avalanche Method<\/strong><\/p>\n<\/p>\n
The debt avalanche method is a more mathematical approach that focuses on paying off the debt with the highest interest rate first. By targeting the most expensive debt, you can save significantly on interest charges in the long run. Here’s how it works:<\/p>\n
\n- List all your debts from highest to lowest interest rate.<\/strong><\/li>\n
- Make minimum payments on all debts except the one with the highest interest rate.<\/strong><\/li>\n
- Allocate as much money as possible toward the debt with the highest interest rate.<\/strong><\/li>\n
- Once the highest-interest debt is paid off, roll over the payment amount to the next highest-interest debt.<\/strong><\/li>\n
- Repeat the process until all debts are eliminated.<\/strong><\/li>\n<\/ol>\n
While this method may not provide the same psychological boost as the debt snowball, it can save you more money in interest charges over time.<\/p>