How to Payoff Debt Fast
The fastest way to payoff debt is to use the Debt Snowball Method. The steps of the method aforementioned is as follows:
Arrange all of your debts from the lowest balance to the highest
Pay the minimum payments for all of your debts except the one with the smallest balance
For the debt with the smallest balance, pay the minimum payment PLUS any extra money you have.
Once you payoff the debt with the smallest balance, pay the minimum payment of the debt with the next smallest balance, plus any extra money you have, PLUS the minimum payment of the first debt you just paid off. This is the beginning of the snowball.
Repeat, adding the minimum payments of all the debts previous debts you paid off to the next one on your list, growing the snowball down a slope, until all your debt is paid off!
Bonus: For the savvy readers, there is an even faster method. One they call the Debt Avalanche. The steps are exactly the same except instead of arranging your debts from the lowest balance to the highest, you will need to arrange them from the highest interest rate to the lowest. The way the math works out is the sooner you payoff debt with the higher interest rates, the less money you’ll be wasting overall on interest, the more money is being used to payoff your principal, thus reducing the amount of total debt you have to payoff and speeding up the process. However, at times your debt with the highest interest rate is also the one with the largest balance. So this method isn’t recommended unless you are physically, mentally, and emotionally ready to accept the challenge.
Why it matters: The Debt Snowball Method is tried and true approach successfully deployed by millions and millions of people to payoff debt. The key to its success the psychological edge from the momentum you get as you payoff each debt by paying off the smallest balances first as opposed to debt with a large balance that seem to take forever to payoff and get that first win.
Key takeaways:
The reason the Debt Snowball Method works is because it taps into your emotions to your advantage.
With discipline, the Debt Avalanche Method is an even faster way to payoff debt. This is especially true with very high interest debt.