The average Canadian has over $21,000 in non-mortgage debt. This number is $23,325 for Americans.
So how can we effectively tackle debt? There are two methods to get this monkey off your back, the snowball method and the avalanche method. How do you choose which one to use? Well, it all depends on your situation, so here is the breakdown on these two methods: DEBT SNOWBALL: The debt snowball method works by building a snowball-like momentum as you pay off your debts.
Here is how it works:
You start by paying off your smallest debt first, and move on to the next-smallest debt, then the next-smallest, and so on. The debt snowball strategy helps you stay motivated to stick with your plan as you are tackling the smallest debt first. And if you stay motivated, you will more likely continue to slay this debt! DEBT AVALANCHE: With the avalanche method, you prioritize the debt with the highest interest rate first and then go down to the second highest interest rate debt, third highest interest rate debt, and so on.
Starting with the highest-interest debt may take you longer to pay off, but when you get to the lower-interest balances, you have also lowered the total interest costs, therefore you can be debt free faster. Let me know what you think about the snowball or avalanche approach. If you have debt, which approach would you like to take? Share your thoughts below in the comments!! No judgement here - I am just happy to know that you are tackling debt! Data sources : Globe and Mail, Fool.com
To learn more about Beverly and Bacon & Heels, read the "Power 5" interview that we did with her in September 2021 - you can read the full blog post HERE.
Thank you for your contribution Beverly!
Contributed article by Beverly Wilks, tech marketing executive, financial literacy champion and blogger at Bacon & Heels.