Twice a week, our CEO and resident money guru Jean Chatzky tackles your burning questions in the HerMoney newsletter. We’ve pulled some of the best to feature on our website — and this one made the cut! Got a question for Jean? Send it her way right here.
Q: Today’s question comes from Chris. She writes: “What’s the ‘avalanche’ method for paying off debt?”
A: When it comes to tackling debt, you’ve got options – and the avalanche method is one of the most effective. It’s designed to get you out of debt faster and for less money overall.
Here’s how it works: You pay off the debt with the highest interest rate first. This minimizes the total interest you’ll pay over time, since you’re knocking out the most expensive debt first.
With the avalanche method, you’ll continue to make the minimum payments on all your debts, but any extra cash goes straight to the highest-interest one. Once that’s paid off, move on to the next debt with the next highest interest, and put extra cash toward it until you’ve reached a $0 balance. Keep repeating the process until you’re completely debt-free.
MORE ON HERMONEY:
- Debt Relief Programs Explained: What They Are And How They Work
- Ask Jean: Should I Use My Tax Refund To Build Savings, Or Chip Away At Credit Card Debt?
- A Smarter Way to Think About Credit Card Fees, Perks, And Points With Your Rich BFF, Vivian Tu
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