One of your goals for 2026 may be to pay down/off debt! If it is, congratulations! Setting your mind to paying down debt is the first step in achieving this life changing process.
There are a few main methods to paying down debt and it’s important to understand these before jumping into the process.
Debt Snowball
Target smallest balances first
This method focuses on paying off the smallest balances first in order to build motivation. Once you pay off one balance, you take that minimum payment and put it towards the next smallest balance to pay it off faster. Once those are paid off, you take those payments and put it towards the next balance and so on.
Pros: More motivating, as you get “wins” faster
Cons: May be paying more depending on interest rates of each date
Debt Avalanche
Prioritize highest interest rate first
The Debt Avalanche method focuses on paying off the debt with the highest interest rate first. After paying off one debt, you take that payment and put it towards the next highest interest rate. This method is popular because it lowers the total amount of interest paid.
Pros: Less overall debt that has to be paid, since highest interest rate debts are paid first
Cons: Tends to be less motivating, as the highest interest rate debt can be one of the largest for some people
Debt Consolidation
Combine debts into one payment
With this method, you combine all debt into one lower interest loan payment. Because it’s a loan, certain things like steady income and a good credit score may be necessary for the best rates.
Pros: Easier to make one payment
Cons: Generally requires a higher credit scores and requires taking out another loan
Pros and cons of each of these methods are important to consider. Once you pick one (most people pick debt avalanche or debt snowball), it’s important to give paying off debt your all.
Making up your mind to pay off debt is the first step. If you’re reading this blog post, you’ve probably already done that – congrats! Taking the next step can be difficult and advice among financial gurus is often conflicting. Some will say that you should never spend money on unnecessary things (eating out, entertainment, trips, etc.). Some will say it’s important to do those things to keep yourself motivated so you don’t end up “snapping back” and going even further into debt. I say – do what works for your family. You’re the one living your life, not the rest of us. Do what works for you! Stay motivated and find your reason for wanting to get out of debt. Keep that in mind when things get hard and make the determination that your reason is more important than whatever you’re spending money on!
What other thoughts do you have on paying off debt? Let me know below!
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