How to Get out of Debt ASAP
Being in debt can feel overwhelming, especially if it seems like no matter how hard you try, the balances just don’t go down. The good news is that there are two proven strategies that can help you get rid of debt faster, even if you have no background in finance: the Debt Snowball method and the Debt Avalanche method. Both are effective, but they work in different ways. Let me walk you through each of them and help you figure out which one is best for you.
First Things First: Understand Your Debt
Before you can get out of debt, you need to know exactly what you owe. This means making a list of all your debts, like credit cards, student loans, or personal loans. Write down:
The total amount you owe (balance).
The interest rate for each debt (this is the percentage the lender charges you for borrowing the money).
If you don’t know the interest rates or balances off the top of your head, don’t worry! You can find this information on your loan statements or by logging into your accounts. This is the first step toward getting in control of your finances.
The Debt Snowball Method: Focus on the Small Wins
The Debt Snowball method is simple and is all about getting quick wins. Here’s how it works:
List your debts from the smallest balance to the largest.
Keep making the minimum payments on all your debts, but take any extra money you can find and put it toward the smallest debt.
Once you’ve paid off the smallest debt, take the money you were using to pay it off and add it to the payments for the next smallest debt.
Keep doing this until you’ve knocked out all your debts.
Here’s why it works: By paying off the smallest debt first, you get the satisfaction of crossing something off your list quickly. It gives you momentum, and that feeling of progress can keep you motivated. It’s kind of like a snowball rolling down a hill—once it gets going, it picks up speed.
Example: Let’s say you have three debts:
A $500 medical bill,
A $2,000 credit card balance,
And a $5,000 student loan.
Using the snowball method, you’d focus on paying off the $500 medical bill first. Once that’s gone, you’d take the money you were using to pay it and start chipping away at the credit card balance, and so on.
The Debt Avalanche Method: Save Money on Interest
The Debt Avalanche method takes a different approach. Instead of focusing on the smallest debt, it focuses on the debt with the highest interest rate. Here’s how it works:
List your debts, but this time, put them in order from highest interest rate to lowest.
Pay the minimum on all your debts, but put any extra money toward the debt with the highest interest rate first.
Once the debt with the highest interest is paid off, move on to the next highest, and so on.
The idea here is that the debt with the highest interest is costing you the most money every month. By paying it off first, you’ll save money in the long run and get out of debt faster overall.
Example: Imagine you have the same three debts:
A $500 medical bill with a 0% interest rate,
A $2,000 credit card balance with a 20% interest rate,
And a $5,000 student loan with a 5% interest rate.
With the Debt Avalanche method, you would focus on paying off the credit card first because it has the highest interest rate. Once the credit card is paid off, you’d move on to the student loan, and then the medical bill last (since it’s not costing you extra in interest).
Which Method Is Best for You?
Both methods work, but they serve different purposes. If you feel overwhelmed and want to see quick results, the Debt Snowball method is a great choice because it gives you small victories along the way. It’s motivating to see debts disappear, even if they’re small.
On the other hand, if you’re more concerned about paying as little as possible in the long run, the Debt Avalanche method will save you more money. You’ll pay less in interest, and you’ll likely get out of debt faster.
The best method for you really depends on your personality. Do you need the motivation of quick wins? Go with the Snowball. Are you laser-focused on minimizing costs? The Avalanche is your best bet.
How to Get Started
No matter which method you choose, getting started is simple. Here’s what to do:
Create a budget: Write down your income and all your expenses. Figure out how much extra money you can put toward your debt each month.
List your debts: Get everything down on paper (or a spreadsheet) so you know exactly what you’re dealing with.
Pick a method: Decide if the Snowball or Avalanche method feels right for you.
Stick to the plan: Stay consistent. The hardest part of getting out of debt is staying motivated, but if you stick with it, you’ll start seeing progress sooner than you think.
Bonus Tips to Get Out of Debt Even Faster
Cut unnecessary expenses: Look for things you can cut out of your budget, like subscriptions or dining out.
Earn extra income: Consider picking up a side gig or selling items you no longer need.
Celebrate milestones: Every time you pay off a debt, celebrate the progress! It doesn’t have to be big, just something that keeps you motivated.
Final Thoughts
Debt can feel like a heavy burden, but with the right strategy, you can get rid of it faster than you think. Whether you choose the Debt Snowball or Debt Avalanche method, the most important thing is to start today. The sooner you take action, the sooner you’ll be free from debt and on your way to financial freedom.
