Today's DueNorth Insight: Debt Management

Today's DueNorth Insight: Debt Management

July 08, 2021

In today’s DueNorth Insight, we’re going to talk about Debt Management. And when we’re thinking about Debt Management, we have to identify all of the debt we have. And the best way we can do that is to create a little spreadsheet and go over what the account balance is, the interest rate on it, and the monthly loan payment. And from there, we wanna be able to understand, how do we most effectively reduce our debt.

There is really two solid strategies to doing that. The first is what we call the Avalanche Strategy. And that involves paying a minimum amount on every balance, and then taking the extra cash that you have, and applying it to the highest interest rate. This is the most effective strategy when trying to maximize our dollar. However this strategy might not be the most effective when it comes to our emotions.

And so there is an alternative, and it’s called the Snowball Strategy. And in that strategy, we’re going to take and pay the minimum amount on all the monthly balances and we’re going to take the extra cash and apply it to the one with the lowest account balance. And there we are rewarded by quickly paying off the smallest debts and moving up the ladder. And that is how we would look at it if we were meeting with you to discuss debt management.

There’s obviously a couple other things we can look at, such as consolidating debt, moving to a zero-interest loan for a time period, or some other items like that. That’s this weeks DueNorth Insight.

 The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.