Rather than eliminating low-interest debt (below 6% APR) ahead of schedule, they’re likely to experience a bigger financial payout by choosing to invest in their retirement or even a 529 college savings plan for the kids.įinally, as with everything personal finance related, the right answer is personal. In that situation, they might consider bolstering their savings while repaying their student loans. The avalanche approach would see Adam and his wife tackle the debt with the highest interest rate, while making minimum payments on the rest, with an aim of saving themselves paying more in interest.Īnother thing to note: If Adam and his wife have federal student loans, they're likely paying relatively low interest rates. That being said, depending on the interest rates Adam has on his various loans, he might be wise to follow the avalanche debt repayment strategy over Ramsey’s preferred snowball approach. Use what’s left each month to pay off all debts, starting with the smallest up to the largest.īy the hosts' estimate, following this plan would result in Adam's household being debt-free in 12 to 18 months.Slash the household budget to $75,000 a year (or $6,250 a month).Sell both cars and downsize, even if the vehicles are “underwater.”.Here are the three steps Cruze, a financial coach, and her co-host Delony, a mental health expert, outlined for Adam to get back on track: "There's gonna be no change in this process," she said, "and mathematically, you don't need to sell your house: You guys just need to get your crap together." As Cruze sees it, Adam and his wife have a few options: "You could sell your home, take $400,000, wipe this all clean.” But she wasn't a fan of that solution.
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