3 Methods For Managing Debt

Nate Crosby |
Categories
Blog

3 Tips For Debt Management  

Many people are involved in debt in some way, whether it be a credit card, medical expenses, student loans and/or personal debt. Managing debt is a crucial aspect of financial health and stability. Proper debt management ensures that you can meet your financial obligations without compromising your ability to save and invest for the future. Besides that, your credit score, interest rates, and long-term financial stability are all impacted by the debt that you carry. 

There is good news and bad news. The bad news is that trying to get out of debt is a heck of a lot harder than getting into it. In fact, this process can become very daunting and tedious. The good news is that there are proven strategies you can adopt to help you manage your debt. 

Here are 3 methods: 

  • Snowball Method – This begins with paying off your smallest debt balance as quickly as you can. At the same time, you will continue to pay the minimum balance for any other debt that you carry. Once you have completed paying off the smallest debt, you will then add that money onto the minimum payment of your next lowest debt balance. Each time you pay off debt the payment amount increases like a snowball until you are finally at your largest debt. Debt becomes less daunting to deal with when you have many of the debt amounts paid off. 
  • Avalanche Method – This method is when you focus on the debt with the highest interest rates first. Again, you will continue to pay the minimum amounts on the rest of your debt. After you finish paying off the highest interest payment, you then move to the next highest interest payment and so on. The benefit in this case is you are clearing the debt that is accumulating the most amount of interest and therefore you are paying more for that debt. 
  • High Credit Utilization – Credit utilization is the amount of your credit line that is being used. If you have multiple credit cards with debt and are unsure with which one to start paying off, focus on the highest credit utilization first. The benefit of this method is that credit utilization plays an important role in calculating a credit score and when paid off this will raise your credit score.   

Each of these methods has their advantages depending on your goals. If you want to pay off your debt as fast as possible then the avalanche method is the best option, but if you are someone who likes to have quicker wins then the snowball method is a better option. Or if you want to increase your credit score while paying off debt then consider paying off the highest credit utilization. No matter which method you choose, managing your debt is one of the greatest things you can do with your finances to take control of your future and your peace of mind. 

Managing debt plays a key role in maintaining financial stability, achieving personal goals, and ensuring long-term economic well-being. It requires discipline, planning, and commitment, but the benefits far outweigh the challenges. Need help? Give our office a call. 

 

 

Disclaimer: Crosby Advisory Group, LLC provides financial planning, business growth strategies and Insurance protection. CAG is a registered investment advisor. Investing involves risk including the potential loss of principal. Consider all risks before investing.