April is Financial Literacy Month. At Paladin Advisor Group, our mission is to help clients Champion Your Financial Life through understanding investment strategies, financial goals for day-to-day life and empowering the next generation to make smart financial decisions.
In celebration of Financial Literacy Month, we’ve narrowed down some key elements that - when implemented correctly - could make a difference in how you think, feel, and interact with your money.
This week the focus is on debt management.
Whether your DTI Ratio is on the larger side or simply a small pesky burden, it's time to take control of your debt - eliminating it once & for all.
If you've joined us for one of our live Debt Management Webinars, you'll know there are multiple strategies you can use to reduce debt. For you avid skiers - these strategies won't be hard for you to remember:
- Avalanche Strategy
- Snowball Strategy
Avalanche Strategy
If you're serious about eliminating debt and want to do it quickly - the avalanche strategy is for you. It's important to note that before implementing the avalanche strategy, you should have enough saved up for both living expenses and emergencies, in the event you need extra funds while dramatically paying down debt.
Next, take a look at your monthly income and determine the amount available (after taking into account your normal monthly expenses). Once you have that number pinned down, check to see which of your debts has the highest interest rate. You'll devote your available income to paying the minimum monthly amount on all of your debts - credit cards and/or loans. 100% of the remaining money will go toward the debt with the highest interest rate each month until it is completely payed off. With each debt eliminated, you'll move on to the next until they're all gone and you're debt-free.
Snowball Strategy
The snowball approach is almost opposite in strategy to the avalanche. Similar to the avalanche, you'll make sure to pay the minimum payment on each debt first. Then, you'll contribute as much as possible to the debt with the smallest value amount. Continue each month until the debt is completely payed off, then move on to the next smallest payment, and so on, until you're completely paid off. The snowball strategy allows you to pay off at least one of your debt sources faster, encouraging you to continue the process until you're debt-free.
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Let us help you.
Our personal favorite is the Snowball approach. Download the Personal Debt Reduction Calculator and try it out for yourself. Better yet, schedule a virtual meeting with an advisor. We'll walk you through the debt reduction calculator and form a plan alongside you to reduce your debt once and for all.
If you do go at it alone, that's great! We're also big fans of success stories. Please let us know if you've benefited from these resources, we'd love to hear about it.
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Additional Debt Management Resources:
Debt Management Financial Education Workshop
What to Look for in Personal Finance Apps
Calculator - Paying off a Credit Card
How does your credit score compare?