Debt snowball vs Debt avalanche
Two common methods or guides to paying off debt are the debt snowball and the debt avalanche. Both involve paying off debts.
Debt snowball strategy
When people talk about the debt snowball method or strategy what they are referring to is the way you pay off multiple debts, starting with the lowest/smallest debt amount with the lowest interest rate applied to it. This is to help motivate and psychologically aid in the journey to becoming debt free.
The main downside to this strategy is that over the course of paying back your debts you will pay more, however, as I'm learning with paying back my own debts a lot of the challenge is staying positive, keeping a healthy mental attitude and doing everything you can to budget, plan and stay on track.
The snowball debt busting method is well suited to this as you have visible debt wins sooner, clearing the number of people you owe too quicker than if you adopted the debt avalanche strategy.
Debt avalanche strategy
In contrast to the debt snowball strategy, this method tackles the highest earning interest debts first. It's likely to take longer to clear a debt and reduce the number of creditors you owe to but the idea is that once the highest is cleared, you'll have more to pay off the next highest
As per the name, the debt mountain clears more quickly in an avalanche style. It's likely that only a strong willed and determined individual would adobt this strategy and succeed in clearing the debts as depending on the amount you owe, it could be a significant amount of time before you experience even a minor "win" in terms of the debt busting journey.
Personally I'm going to adopt the avalanche strategy. The reason for this in my circumstances is that with the amount of debt owing, I believe I can make significant ground clearing the highest interest earning debt my overall credit score will improve and in time likely be offered incentives to balance transfer at a much lower rate back to my original credit card I've had since 2000.
I've already started progress in terms of researching ways to make additional money to go towards my avalanche fund, on top of the usual payments I make. These include the ways I mention in my top 5 ways of making additional cash.