You may be in a spot where managing debt is a critical part of your financial journey. Whether it’s student loans, credit cards, or personal loans, creating a plan for repayment is essential to long-term financial health. But how do you do this effectively?
The first step in effective debt repayment is gaining a clear understanding of what’s owed. That means listing all debts, including balances, interest rates, and minimum monthly payments. With this information, borrowers can begin to prioritize how they want to tackle repayment.
Two popular strategies are the avalanche method and the snowball method. The avalanche method involves paying off the highest-interest debt first, which can save the most money over time. In contrast, the snowball method targets the smallest balances first, offering quicker wins that can boost motivation. So, which one should you do? If you value paying the least amount of interest, go the avalanche method. But if you need those quick wins, go the snowball method.
Remember, neither of these strategies is right or wrong. What matters is picking a strategy and sticking to it!
While debt repayment is important, it’s not the only priority. Be sure to have an adequately funded emergency fund of three to six months of living expenses to keep you from building up your credit card balance again. Also consider any employer matching contributions in your retirement plan, as it may make sense to still contribute to retirement while you pay down debt.
Debt repayment doesn’t happen overnight, but a structured approach can lead to steady progress. With commitment and planning, you can reduce your financial burden, build better habits, and set yourself up for a more secure future.
Did You Know?
Your employer sponsors this financial wellness benefit from Francis LLC. The benefit connects you with down-to-earth financial planners who educate and advise on any money matters…without the sales pitch. We are exclusively engaged by employers like yours and have no investment products to sell, so you can feel confident that you will always receive objective advice.
Your financial planner will help you set priorities and achieve your money goals, without judgment or financial jargon. Know that all discussions are kept strictly confidential. This service is offered as an employee benefit with no per-session co-pays, so you can meet with a financial planner as often as you wish. Services are paid by your retirement plan or your employer.
Connecting with a financial planner is easy! Here’s how:
- Visit FrancisWay.com > Services > Participant Portal
- Call (866) 232-6457
- Download the free mobile app (Search for Francis LLC)
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