Two approaches to eliminating credit card debt
Just as teachers often use different techniques to explain concepts to students, financial advisors can typically recommend different ways for clients to eliminate debt. Countless people in Florida and beyond carry consumer debts like credit cards, but do not know the best way to pay off their loans. Fortunately, there are a couple different approaches people can take to understanding and eliminating debt for good.
The snowball approach
When individuals implement the snowball technique they first pay off the balance on smaller loans before using that money to pay off larger debts. By starting small and moving their way up, many people gain a tangible sense of accomplishment. The advantages of this technique were recognized in a Northwestern University study, which found that people that used the snowball approach were generally more successful at eliminating their debt entirely. That is not to say, however, that snowballing is the only or best technique.
Because the snowball approach does little to address the issue of interest charges, many financial advisors would recommend starting from the top instead. Individuals can actually save money in the long run by paying down debt on loans with high interest rates first. This approach is more lucrative over time, but may not offer the short term encouragement some people need.
Ultimately, it’s up to each person to address their financial situation in the way that is the most reasonable and realistic to them. By committing to a plan, individuals can begin to tackle their credit card debt and move forward with their lives.
Source: dallasnews.com, “Mind over math: How best to erase debt?” Michael Austin, Nov. 22, 2013