How to Easily Pay Off Debt Using the Debt Avalanche Method.

Most Americans have debt that threatens their financial freedom. Almost everyone has some form of debt, some more than others.

Credit cards, student loans, personal loans, and car payments, they have become a part of our life that we don’t like but live with to be able to have things now. Getting it now and paying for it later has become the norm in our society.

There are methods you can use to reduce and even eliminate these debts. We don’t include house payments here because a home mortgage is considered good debt. Because most homes appreciate, and the interest rate is usually low, this should be the last debt on your list. Paying off debt takes discipline and time, but with a plan you can do this and get your debt back to a manageable state or even eliminate it altogether.

There are many methods you can use to pay off debt. To name a couple, there is the Debt Snowball Method and the Debt Avalanche Method. We already discussed the Debt Snowball Method so today we are going to look at the Debt Avalanche Method to pay off debt.

What is the Debt Avalanche Method to Pay Off Debt?

Simply put, the Debt Avalanche Method of paying off debt is to work first on paying off your highest interest rate debt, regardless of the size of the debt. Once that is paid off, you start tackling what is the next highest interest rate debt, and so on.

The rationale for this method is that pay paying off the highest interest rate debt first, you will save more money to put toward your next goal, the next highest interest rate debt.

This method is quite different than the Debt Snowball Method where you start by paying off the debt that is the smallest. See my article on the Debt Snowball Method for more details.

How to Use this Method

First thing is to make sure you have enough money to at least make minimum payments on all your debt.

Then list out all your debt and arrange them in order from the highest interest rate to the smallest interest rate. Your debt may include credit cards, student loans, car payments, personal loans, medical bills, and any other outstanding bills. The debt with the largest interest rate is going to be your first target to eliminate.

Set a target amount that you can afford to pay toward this debt every month. If money is tight, look for spending habits that you can reduce to help you pay down this debt. Maybe you need to take lunch to work a few days a week instead of eating out. Perhaps making your own coffee instead of stopping at the local coffee shop a couple of times a week. It could be living with the clothes you have instead of buying more. These are all things you can do to save more toward your debt payoff goal. I am not saying you need to completely cut out all of these but cut back as much as you can to save some money to pay off debt quicker.

If you have student loan debt that is the amount of a house, you might want to skip that one and move to the next highest interest rate. That way you get your debt reduced down to your mortgage and student loans, then start tackling those.

Is the Debt Avalanche Method Right for You?

There is no one method that is best for everyone. Take a look at all of the debt reduction methods and see which one might work best for you. The Debt Snowball Method may be great for some, and the Debt Avalanche Method may be best for others.

Give the Debt Avalanche Method a try and see if it works for you. The one thing to keep in mind is the spending habits that got you here in the first place. If you don’t seriously manage a budget to keep spending down, you will never control your debt. This is especially true for credit card debt. See my article on How to Create a Successful Monthly Budget That is Achievable Now to see how you can set up a workable budget today.