You want the most bang for your buck, right?
Even when it comes topaying off debt, youre likely not interested in spending more than you better.
What you need is an avalanche.
Drowning in Expenses?
Maybe youre scrambling after your car broke down.
Or you got a medical bill you werent expecting.
Or inflation has finally pushed your budget over the edge.
You dont need to go it alone.
When money is tight,these resourcescan help you manage unexpected expenses without stress.
What Is the Debt Avalanche Method?
Its best for people who dont necessarily aim to pay off individual loans quickly.
How the Debt Avalanche Method Works
The concept may be easy, but the execution is hard.
Heres how you’re able to get the avalanche moving in five simple steps.
Order them from the highest interest rate to the lowest.
you might write them down or put them in a spreadsheet, app ordebt calculator.
Some debts you might list include:
Leave out any debts outside of the statute of limitations.
Add those minimum monthly payments to your list.
In this example, the minimum payments for all your debts equal $700 per month.
Thats a big payment.
Knowing that the sacrifice is temporary can help you cut expenses and work extra hours you otherwise wouldnt consider.
Lets say you’re able to put an extra $300 per month toward debt.
That would make your total available debt budget $1,000 per month.
In total, that gives you a total of $500 paid toward the Mastercard each month.
Youll continue making those payments until the card is paid off, which is approximately 17 months.
This timespan is a clear example of why the debt avalanche method isnt for people who need quick wins.
It should only take only three months.
Youll put a total of $760 toward the student loan debt until its paid off.
But, heres the kicker: The car loan has dropped to less than the student loan over time.
And, it has a higher minimum payment.
As a result, the car loan will be paid off in month 31.
Youll finish off your student loans in month 33, just two months later.
We Dare You to Take Control of Your Debt
Up for a debt challenge?
In 10 days,these 10 practical stepscould help you get back on the right financial track.
Benefits of the Debt Avalanche Method
There are several benefits of using the debt avalanche method.
So, youll be able to rapidly pay down remaining debts after the initial debt or two are eliminated.
The debt avalanche method is not about having a quick win.
Debt Avalanche vs. Debt Snowball: Which Is Better?
A debt avalanche isnt your only option when it comes to paying off debt.
In our example above, we paid off $28,000 in debt and $3,410 in interest.
If wed used the debt snowball method, we wouldve paid approximately $3,563 to interest.
The debt avalanche saved us $153 in interest payments over two years and nine months.
Thats about $5 per month.
Be patient.you could get into debt really quickly, but it takes time to get out.
Have patience and persevere through lulls and hard times.
Dont stop after one calculation.
Continue to plug your numbers into calculators to see how much youre saving every month.
Doing this can be motivating.
Listen, we know its tough out there.
But theres no shame in asking for help.
These companiesmake it easy to help yourself and your bank account.
Dana Sitar is a former editor at The Penny Hoarder.
