debt snowball Archives

Money Like You Mean It

Money Like You Mean It by Erica Alini describes itself as a book that offers “Personal Finance Tactics For the Real World.” It was published in 2021, so it’s a great book if you’re looking for something that reflects today’s environment – not how the world was twenty years ago.

Some of the things that Erica addresses in her book are:

How to navigate the crazy housing market, including the merits of renting versus buying.

Whether side hustles are worth it or not.

How to negotiate a raise.

How to invest so you can achieve financial independence and retire before you’re 80!

What to do about student debt!

How to handle complicated issues like family finances and unexpected changes in life such as a sudden job loss

This book can help anyone but mainly aims at Millenials and Gen Z.

Debt Free Forever

Gail Vaz-Oxlade wrote Debt-Free Forever. If this name seems familiar, it’s because she’s hosted several shows about getting smart with your money, including “Til Debt Do Us Part” and “Princess.” I’ll freely admit I’ve watched every single episode of both these shows. I’m such a fan of Gail I’ve even seen in her person – and she is FUNNY!

Gail is known for being straightforward and not mincing her words. Debt-Free Forever is an excellent choice if you are feeling overwhelmed by debt and don’t know how to start digging yourself out. Debt-Free Forever explains:

How to take control of your spending and determine where all your money is going.

How to list your debts and determine just how much you’re paying in interest every month.

Put together a budget you can actually live on.

Determine how to maximize your debt repayments.

Understand the importance of setting aside an emergency fund and how to get started building one.

How to get started setting short and long-term goals for a debt-free life!

If you are looking for a book that gets into the ins and outs of investing or negotiating for a raise, then Debt-Free Forever isn’t for you. If, however, you’re looking for a book that will give you hope and a clear plan to claw your way out of debt and stay that way, then Debt-Free Forever is an excellent choice!

Last week, I covered the first step in paying off your debt – knowing just how much you have! The next step is figuring out how you are actually going to pay off the debt! Next week, I’ll talk about finding extra money (whether it’s through earning it or cutting back), but this week I’m going to talk about figuring out what approach to paying debt is best for you. I’ll cover two of the most popular strategies:

Debt avalanche
Debt snowball

1. Debt Avalanche

With the debt avalanche route, you first target your debt with the highest interest rate. You don’t target the debt you owe the most (or even the least!) on – instead, you target the debt you are paying the most interest on.

For example – you have two credit card balances:

On Card 1, you owe $5,000 at 10% interest
On Card 2, you owe $2,000 at 20% interest.

With the debt avalanche approach, Card 2 is now your priority to pay off, even though you owe more on Card 1 than you do on Card 2. If you can put an extra $100 over the total minimum you are paying on Card 2, you will pay off Card 2 much faster. Once you have completely paid off Card 2, you can then put that extra money towards Card 1.

The main advantage of going the debt avalanche route is that you are saving more money by first tackling debts with the highest interest rate. So the debt avalanche route is excellent if you are concerned with paying as little interest as possible.

1. Debt snowball

With the debt snowball route, you prioritize your smallest debt, no matter the interest rate. For example, you have three credit card balances:

On Card 1. you owe $5,000 at 10% interest
On Card 2, you owe $2,000 at 20% interest.
On Card 3, you owe $1,000 at 5% interest.

With the debt snowball approach, pay off Card 3 first (throwing any extra money at it that you can), even though the interest rate on Card 3 is lower than it is on the other two cards. After you have paid the balance on Card 3, you move on to Card 2.

The main advantage of the debt snowball route is that you get the “win” of paying off debt quickly. So the debt snowball approach is great if you need a constant boost to help keep you on track.

What’s best for you?

That depends on your personality! If you’re the kind of person who needs to have a quick “win” in order to keep yourself motivated, then I recommend the debt snowball approach. If you hate the idea of paying extra interest and know you can keep yourself motivated, then the debt avalanche is the route for you!

To get started, check out this great calculator that can tell you how fast you’d be out of debt using each approach. No matter how you pay off your debt, you’ll feel better the sooner you get started! Tell me in the comments which route you prefer!