There is no sure-fire way to handle your finances or handle paying off debt. Each situation requires a different approach, depending on your personal financial needs. So, when it comes to being debt-free, what is the best way to handle paying off your accounts? How do you decide between a debt snowball vs. debt avalanche?

Debt Snowball vs. Debt Avalanche

“Debt snowball” and “debt avalanche” refer to two ways you can choose to pay down your debt. Deciding which method is best for you depends on your own personal situation. However, there are pros and cons to both approaches. Here’s what you need to know.

The Debt Snowball

Snowballing your debt is a great way to pay off your accounts in a quick fashion. To use this approach you need to begin paying off your debt in order of smallest to largest. So, if you have three accounts that need to be paid with amounts of $1,450, $6,578, and $10,755, you’d start paying as much as you can on the $1,450 account. Pay the minimums on the other two until you pay the first (smallest) account off. Once you’ve paid that account, move on to the $6,578 debt, then the $10,755.

Perks of using this method are being able to see your debt is paid off in a quick fashion. It provides a feeling of accomplishment and helps keep you motivated. You’ll also be able to free up more funds as you pay off the smaller accounts to tackle your other debt.

When it comes to comparing the debt snowball vs. debt avalanche, one con of the snowball may be that you wind up paying more in interest over time. It may also take longer to pay off your debt this way. However, it is a tried-and-true method.

The Debt Avalanche

Using a debt avalanche is another great way to pay off your debt over time. Instead of paying down debt by the total amount owed, you pay it off by the interest rate. So, if the three accounts mentioned above had interest rates of 7.9%, 9%, and 12%, then you’d want to start throwing money at the $10,755 account with the 12% interest rate first.

The biggest perk of this type of debt payoff plan is you’ll pay less interest in the long-run. You may also find that a debt avalanche approach helps you pay your debt off faster than the debt snowball approach. However, it can be harder to maintain your motivation with the avalanche method. It can also feel like it takes a longer time to pay things down.

Choosing the Best Approach For You

When it comes down to choosing between a debt snowball vs. debt avalanche approach, both will help you meet your goal of being debt-free if you stick to it. The best way to choose which is right for you will depend on your personal goals and what keeps you motivated.

If you think you’d lose motivation with the avalanche method, maybe you should try snowballing your debt first. Or maybe the thought of saving money on interest will keep you pushing forward on paying off your debt. If that’s the case, try out a debt avalanche instead.

You also don’t have to choose one or the other. Sometimes the best approach to paying off your debt is a combination of the two. Deciding what will motivate you and help you reach your debt-free goal is most important.

Have you tried either one of these debt payoff approaches?

Read More

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Debt is something that we all are, have, or will be dealing with in our lives, and it’s no secret that it can be quite the stressful experience. From stress about how we’re going to drum up the money, to the anxiety as to what might happen if we don’t can eat away at our nerves, but what about our children? How are they affected when we’re in debt? That’s what we’re exploring today. While online payday loans are available in a financial emergency, understanding how to deal with debt and how it could be affecting the little ones is a must – so read on to find out more.

How Does Your Debt Affect Your Children?

From babies and toddlers to older children and teenagers, your kids aren’t quite as oblivious to your stress as you might hope they are. The last thing any of us want is for our stress to rub off on our children, but the unfortunate fact of the matter is that it will – but is this always negative?

When we grow stressed, we may not be able to operate to our full potential no matter how hard we try and this obviously has an effect, especially on younger children. Stress can make us snappy, less inclined to spending time with the little ones and in general, completely different from how we normally operate. What’s more, a lower budget means that you may not be able to cater for the costs of school trips, socialising and they may have to go without basics when things get truly tough. As a result, a child’s mood, mental health and self-confidence could take a hit.

How Can You Deal With Your Debt?

With the above in mind, dealing with the debt you do have is vital. Stress is a natural reaction when things seem out of your hands, so it’s important to gain control where possible to help reduce stress on you, your bank account and your children. We’ve got a few tips below.

• Face Facts

First things first, you need to stop, think, and face facts. Coming to terms with how much you owe, what your income and outgoings are and what you can realistically start to pay off without risking the quality of life for you or your kids. Track down paperwork, bank statements, open up bills you might’ve been otherwise been ignoring and actually work out everything you owe. This might seem counter-productive for your stress levels, but by organising your debts and laying them out separately, you can start to tackle them individually as opposed to a large, terrifying total sum.

• Create A Budget

Remember the organisation you did in the above point? Well, now you can put it to some proper use. Crafting a budget is a great way to save money that you can put towards your debts without having to completely give up your lifestyle. While you might need to cut down on the leisure activities and swap them out for nights in or avoid the early morning coffee shop trips in favour of home-brewed alternatives, you can cut down your outgoing costs and put them where they’re needed more.

• Prioritise

When it comes to the debts you owe, you need to prioritise as opposed to trying to pay them all off at once. To do this, all you need to do is work out which debts have the highest interest rates, and start pouring your money into them instead. Of course, you’ll need to pay the minimum charges on all of your debts, but with any extra cash, aim for one debt rather than spreading it out across multiple and once that is paid off, move onto the next and so on.

Debt is an unfortunate fact of life and while it’s possible to avoid some debts, there are others we have to take on and it can often be overwhelming. While our children can be affected by our financial stress, there are thankfully plenty of ways to get your debts under control and hopefully, our points above have given you a good place to start.