Debt management is more of a process than a quick fix. Understanding this is critical to pulling yourself out of debt. A financial coach or debt coach can show you in detail the best debt management strategies of today. If you have been searching the Internet, you probably have come across a few of the more popular debt management strategies. However, whichever strategy you choose will be directly dependent on your current financial situation. Not everybody has the same type of debt and not everyone has the same amount of debt. Therefore not everyone should use the same debt management strategies.
Think of debt management strategies as a diet. Everyone has an individual body type unique to their own personal metabolism. Therefore, a lean meat diet may work for you and a vegan diet may not. Someone else may find that a vegan diet works better for them over the lean meat diet. In the same way that diets are more effective when paired with the corresponding metabolism. Debt management strategies are more effective when paired with the corresponding forms of debt.
In this article, we will cover 2 popular debt management strategies. To maximize your debt repayment plan, consult with a qualified financial coach to discover which debt management strategy is right for you.
The Debt Snowball Method
The debt snowball method is a great way to get the feeling that you’re actually making progress. It’s very simple and easy to understand. Let’s say you have three credit cards that need to be paid off. The balance between all three of those credit cards comes to $15,000. If your minimum payment on all three of those credit cards totaled up to be $250, this is the number that we will start with. Make sure that by paying $250, you won’t be putting yourself out of a home or without food. Once we have established that we can afford to make the minimum payment to all three of our credit cards, we can begin.
Eventually, the credit card with the lowest balance will be paid off. When that happens, you take that minimum payment and add it to the payment of the credit card with the next lowest balance in line. Now you are paying more than the minimum balance on the next card and it will be paid off in a faster time. When that card is complete, simply add the entire $250 to the last remaining credit card and now you have a payment significantly higher than the minimum.
Debt Avalanche Method
This method begins by identifying the credit card with the highest interest rate. After identifying that card, we will flag this balance to be paid off first. We will quickly pay this debt off the fastest since we are putting all of our extra money into paying this balance down first. Since it is your debt with the highest interest rate, it only makes sense to start there.
While doing that, we will simultaneously make the minimum payments on all of our other credit cards as well. Once that first credit card has been paid off, we will then simply move all your extra money into the next highest interest rate card.
Consider the following methods when you are attempting to pay down your debts. It is always advisable that you speak with a qualified financial coach to determine which method is right for your individual situation. Consider the ways that debt may be affecting your life. Is it debt keeping you down? If so, consult with a debt coach immediately to gain the relief you seek.