Paying Down Debt in the New Year
You may have tried many ways of saving money or paying off debt but found that you became overwhelmed and frustrated and just stopped trying. We understand that debt can build up fast, especially during the holiday season, so we found these easy-to-use payment methods that will effectively pay down accumulated debts from the previous year.
Snowball Method
The Snowball Method is a great tool when an individual carries balances on multiple credit cards. Implement this plan by listing all credit card debt from the largest to the smallest. Make sure to make the monthly minimum payment on all the balances and put any extra funds available towards the debt with the smallest balance. After one balance is paid in full, move on to the next smallest balance. Continue this until you only have your largest debt left. This is a great way to stay motivated to pay off your credit cards and loan balances. Paying smaller balances in full can be gratifying and ease the stress of having multiple debts. The progress may seem quick and encourage the continuation of paying down balances.
Avalanche Method
Like the Snowball Method, the Avalanche Method is another tool to use while trying to pay down debt. This method differs from the Snowball Method by paying down debt starting with the largest debt instead of the smallest. Higher balances will have higher interest. So, this method is excellent when trying to avoid paying large amounts of interest. Be sure to make minimum payments on all debts and pay extra towards the highest balancing debt.
Decide which method is best for you and give it a try. You may be pleasantly surprised. We have found that more than half of shoppers are going into debt this holiday season. By using one of the payment methods above, you can avoid negative impacts on your credit score. Contact our certified financial coach by emailing her at creynolds@newdimensionsfcu.com or by calling (207) 660-6267 if you need assistance with budgeting, paying off debt, or saving.