We are now coming into winter, and it can get expensive – winter gear, winter tires, Christmas gifts, and holiday celebrations with friends and family. It can be hard to get through the next few months without accumulating a bit of debt. So, how to tackle that?
Here are 3 snow-themed methods that are highly recommended by financial professionals:
1. The Avalanche Method
Make a list of all of your debts and focus on paying off the one with the highest interest, because this is the one that is costing you the most. Make minimum payments on everything else. Once this one is paid off, go down the list to the one with the next highest interest rate.
This method will save you the most on interest payments in the long run, but it may take longer to see the results.
2. The Snowball Method
Again, list all your debts, and focus on paying off the one with the lowest balance. Make minimum payments on everything else. Once this one is paid off, go down the list to the one with the next lowest balance.
This way of paying down your debt provides more instant gratification. By starting with the smaller debts, you get some quick wins, and a greater feeling of accomplishment. the downside is that it may take longer to pay off your debt, which could result in higher interest over time.
3. The Snowflake Method
This one can be used if you are on a tighter budget, and receive periodic injections of cash i.e. quarterly bonus, tax refund, selling items second-hand, etc.
Snowflaking is taking all of these little windfalls and applying them to your debt, so that all of the little amounts add up over time. By itself, the Snowflake Method will take longer to achieve your goal. You can do this in tandem with the avalanche or snowball method, topping up your existing payments to get quicker results.
If you have questions about how this works, and the best method for you, I’m always happy to help.
April Parlee
CCS, LLQP
PS – ask me about Cash Flow Planning!
