Step 2: Make minimum payments on all debts except the smallest— throwing as much money as you can at that one. Once that debt is gone, take its payment and apply it to the next smallest debt (while continuing to make minimum payments on your other debts).
Step 3: Repeat this method as you plow your way through the rest of your debt. The more you pay off, the more money you can throw at your next payment—like a snowball rolling downhill, getting bigger and faster as it goes!
Why Ignore the Interest Rates? Sure, you might think paying off the debt with the highest interest rate first would save you more money in the end. That method (known as the debt avalanche) seems like it would make the most sense—at least mathematically. But here’s the deal: Personal finance is 80% behavior and only 20% head knowledge. Just because it makes the most sense on paper, doesn’t mean you’ll actually stick to it. It’s important to pay your debts in a way that keeps you motivated until you’ve wiped them out.
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