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Weekly Financial Tip


Two Popular Methods to Dig Yourself out of Debt:

· The Debt Snowball Method

To use this method:

1. List all your debts in order by size from smallest balance to largest balance.

2. Pay the minimum monthly payment on all your debts.

3. Apply any leftover money (budget surplus) to the debt with the smallest balance.

4. After the debt is satisfied, apply its previous monthly payment as well as any leftover money to your next smallest debt.

· The Debt Avalanche Method

To use this method:

1. List all your debts in order by interest rate from highest to lowest.

2. Pay the minimum monthly payment on all your debts.

3. Apply the leftover money (budget surplus) to the top-rate debt.

4. After the debt is satisfied, apply its previous monthly payment as well as any leftover money to your next top-rate debt.


Which method works best for you?


With both debt methods, you make the minimum monthly payment on every debt. With the avalanche method, you end up paying less interest over time and paying down your debts a little faster. However, for many people, the gratification of seeing the first debt paid off quickly under the snowball method gives them the inspiration to keep going. The key to each method is focusing on one debt at a time. Use this calculator to see which method is best for you!


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