The Two Easiest Ways to Pay Off Debt Fast
The average American household that owes money has an average balance of over $15,000 attached to credit cards alone. Coupled with mortgages, auto loans from Buy Here Pay Here dealers in RI, personal loans, and other debt, we’re a nation that owes money to way more sources than we should.
But if you’re looking to get serious about paying off your debt, there are two methods you need to keep in mind in order to save money on interest and build momentum toward a credit-card-debt-free life.
Method #1: Suze Orman’s Advice
Financial advisor and longtime CNBC host Suze Orman’s method for paying off debt is widely known in the personal finance world. Her advice is to first calculate how much money you can conceivably afford to set aside for credit card payments each month, a number that should include changes in lifestyle.
From there, you want to list the minimum payments associated with each credit card and add $10 to each. You then want to add all of those payments together and throw that money at the credit card with the highest interest rate.
After that card is paid off, you move on to the next card with the highest interest rate and repeat until everything is paid off and you’re debt free.
Method #2: Dave Ramsey’s Debt Snowball
Radio personality Dave Ramsey popularized the debt snowball method, which essentially works to get people slowly used to paying off all of their credit card debt by quickly getting rid of low-balance debt and working up to the big stuff.
It’s an extremely simple and effective method: List your credit card debt and start paying as much as you can on the lowest balance while paying the minimum on all other cards. Apply the same to the next lowest balance after the first is paid off and continue until you have successfully paid off every single card.
Which Method is Better?
Both methods essentially cancel each other out when it comes to overall savings. Dave Ramsey’s method works best if you’re having problems paying off a large number of cards, but Suze Orman’s would save someone with a high balance, high interest rate card a ton of money if they began throwing a ton of money at it.
When deciding, look at your own situation, weigh the options, and see which suits you best.