Pay Off Debt Fast: Choose the Right Strategy in 2 Minutes

Hello LinkedIn community,

Dealing with debt can be overwhelming, but we're here to simplify the process and help you understand the best options for paying it down in just 2 minutes.

Know What You Owe: A practical way to keep track of your debts is by creating a comprehensive list inside of Fina or a spreadsheet, including the creditor's name, total amount owed, interest rates, monthly payment, and due date.

Strategies for Paying Off Debt:

1. The Debt Snowball Method: This strategy is designed to build momentum as you tackle your debt.

• List Debts from Smallest to Largest: Order your debts from the smallest to the largest amount, regardless of interest rates.
• Focus on the Smallest Debt: Pay the minimum on all debts except the smallest one. Pay as much as you can afford on the smallest debt.
• Celebrate Wins: Once the smallest debt is paid off, apply the amount you were paying on that debt to the next smallest debt, in addition to its minimum payment.
• Repeat the Process: Keep rolling over payments from cleared debts to those still outstanding.

The psychological wins of paying off smaller debts first can provide a sense of accomplishment and motivation.

2. The Debt Avalanche Method: An alternative approach that prioritizes debts with the highest interest rates.

• List Debts by Interest Rate: List your debts from the highest to the lowest interest rate.
• Prioritize High-Interest Debts: Allocate as much money as possible to the debt with the highest interest rate while paying the minimum on other debts.
• Maximize Interest Savings: As you pay off the highest-interest debt, move to the debt with the next highest interest rate. The money saved on interest accelerates the repayment of other debts.
• Continue the Process: Keep repeating this method, always focusing on the debt with the highest interest rate until all debts are cleared.

The debt avalanche method is financially efficient, minimizing total interest paid over time.

Choosing Your Strategy: Both the snowball and avalanche methods have benefits. The snowball method can be more motivating, providing quick wins, while the avalanche method is more efficient in terms of interest savings. Personally, I prefer the debt avalanche method due to its dollar efficiency. It works for me because I am careful with tracking and optimizing each dollar I spend.

Take Control of Your Financial Future: Now, armed with the right strategy, start paying down your debt and take control of your financial future!

Bahroz Abbas Hussain