If consumer debt has become overwhelming, it’s time to ditch it for good…but how?

If you’ve worked through The Money Playbook you’ll know we talk about the Snowball method as a way to tackle your debts, but there are more methods to help you become debt free.

We’re putting two of the most popular head to head to see which comes out on top…

Snowball

1) List your debts in order from smallest total balance to the largest

You can do this in the debt tracker tool. Interest rate isn’t the most important factor at this stage, it’s a number many people obsess over but really it can distract from the main issue – the actual debt!

2) Start your debt snowball plan by paying as much as you can on the smallest balance, using your Excess

Simply pay minimum payments on all your debts, which should already be in your budget, and put all your Excess aka what’s left over when you’ve created your budget, into the smallest debt until you clear it.

3) Once you’ve paid a debt off, move on to the next debt on the list.

Remember you’ve just saved yourself a monthly payment by paying off debt number one. Whatever you were paying off that debt now gets added to your Excess and used to overpay the next debt.

You build momentum with each payment, reducing your overall debt whilst at the same time, using the same original income to pay it down faster. By the end of the snowball, you use all the former monthly payment amounts, along with the remainder of your Excess, to smash the last debt.

For more information and visual guide head to ‘How To Ditch Debt’ section in the Financielle Playbook.

Avalanche

The Avalanche method is similar to the snowball method but instead of ordering debts from smallest to largest you order debts from largest interest payment to smallest.

Mathematically this makes perfect sense but if you’re in it for the long haul and your debt free journey isn’t going to happen overnight, psychologically you need all the wins you can get.

Motivation is EVERYTHING when you’re on a debt free journey and saying goodbye to a debt – whether it’s because it was the highest interest rate or because it was the lowest amount – will make you super happy and proud – this is the thing that keeps you going.

There’s no right or wrong here, it’s down to personal preference.

We’re intrigued to know, which method will you choose?

Track your debts for free in the Financielle app now.