Another Method for Paying Off Debt

Good morning and Happy Friday!

Welcome to another edition of The Matt Viera Newsletter.

The newsletter with the goal to inspire you to live the life you actually want to live.

Thank you for your continued support.

I've been feeling pretty good lately.

• Summer is quickly approaching

• The weather is starting to get warmer

• I plan on escaping NYC and camping more often

• My "mini-retirement" for the summer is planned and booked

• I have some ideas I'm excited to learn about and potentially implement

All a part of my plan to live a life I actually want to live.

Things are definitely headed in a positive direction.

I hope each and everyone of you can share a similar sentiment.

I wrote an article about the Debt Snowball Method a few weeks ago.

A method I used to pay off various forms of debt (which I didn't even know had a name).

Well, the Debt Snowball Method has a companion: the Debt Avalanche Method.

Think of the Debt Avalanche Method as the Debt Snowball Method's bigger, stronger, uglier older brother.

Let's dive in:

Here's how the Debt Avalanche method works:

Gather all the information regarding any "bad" debt you have.

Remember: "bad" debt is any debt with an interest rate higher than 7%.

Now, take out a sheet of paper, open a spreadsheet, or a Google doc.

Use whatever works for you and is easy to reference.

Then list each debt from highest interest rate to lowest interest rate.

Next to each balance & interest rate, list the minimum monthly payment for each card.

This is what your list should look like:

• CC#1 Balance: $2475, Interest: 21.7%, Min payment: $40

• CC#2 Balance: $1625, Interest: 21.1%, Min payment: $35

• CC#3 Balance: $2315, Interest: 20.9%, Min payment: $55

Now, look back at where you spent money for the past 30-, 45-, 60-, or 90 days.

(You have been tracking your spending, right?)

Figure out where you can cut spending.

Restaurants, happy hours, brunch, impulse shopping?

You're trying to find extra money you don't need to spend, to use only for repaying your "bad" debt.

Let's say you can safely use $150 per month for debt repayment.

Start by attacking the debt with the highest interest rate.

Add the extra money you found to the minimum card payment with the highest interest rate.

$150 + $40 = $190.

You'll pay this toward the card with the highest interest rate until it's paid off.

NOTE: Remember to pay the minimum monthly payment on your remaining cards.

Now that the balance of the first credit card is paid off move on to the next.

Add the $190 to the minimum balance of the next highest interest rate card.

$190 + $35 = $225

Pay $225 monthly on that card until the balance is paid off.

Then, attack the next card.

The minimum monthly payment for the next card is $55.

Add that to the $225 ($280).

Pay $280 on that card until the balance is paid off.

And so on and so forth.

Once your credit cards are paid off, you'll have an extra money just waiting to be spent (in this case $280).

Don’t just spend it.

Ask yourself, “What can I use this money for (other than spending it on things I don't need)?”

Keep the Avalanche going.

Use the money to attack any other debt you may have: your car or student loan.

Or use that money to build your emergency fund (so you don't have to rely on credit cards).

Remember, you can always use the Debt Snowball Method.

With this Method, you'll attack credit card debt based on the lowest balance to the highest.

This may be a quicker way to pay down the debt.

But it may cost you more money in the long run.

Use whichever method you're comfortable with.

Tiffany Aliche, the author of the bestselling book Get Good with Money, suggests using a blended approach of both methods.

The reason being:

Knock out that $200 for the quick win.

Whichever method you use, be disciplined and consistent about it.

With discipline and consistency, you can finally pay off credit card debt once and for all.

Remember: you deserve to live a life free from credit card debt.

Interesting find:

Your credit card debt is probably about to get more expensive

Thanks for reading!

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