Frequently Asked Questions
What is the debt avalanche method?
The debt avalanche method means making minimum payments on every debt and putting any extra money toward the debt with the highest interest rate first. Once that is paid off, you move to the next-highest rate. It usually saves the most interest over time.
What is the debt snowball method?
The debt snowball method means paying minimums on everything and directing extra money to the smallest balance first, regardless of interest rate. Clearing small debts quickly creates visible wins that help many people stay motivated. It may cost more in interest than the avalanche method, but the method you stick with is the one that works.
Should I build an emergency fund before paying off debt?
Many people benefit from building at least a starter emergency fund before aggressively paying down debt. Without savings, an unexpected bill can push you back onto a credit card and undo your progress. Once you have a cushion, you can direct more money to debt while continuing to add to savings over time.
Is it better to rent or buy a home?
It depends on your finances and plans. Buying can make sense if you have a down payment, stable income and expect to stay put for several years, while renting can be better if you value flexibility, carry high-interest debt or would be stretched by the full costs of ownership. Comparing the total monthly cost of each option, not just rent versus a mortgage payment, gives a clearer answer.
About the author
Contributing Writer, Wealthtender
Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine.
Karen provides copy editing and proofreading services, as well as content creation services, at her website KarenBanes.com.