You've learned about credit cards and debt - now let's tackle actually paying it off! If you have debt from multiple sources, having a smart strategy can save you money and time.

Random payments won't get you there fast. You need a systematic approach.

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What do you expect will be your toughest challenge in paying down debt?

There are two popular debt payoff strategies: the avalanche method and the snowball method. Both work, but they attack debt differently.

The avalanche method focuses on interest rates, while the snowball method focuses on psychology and motivation.

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Which sounds more appealing to you - saving the most money or getting quick wins?

The avalanche method means paying minimums on all debts, then putting extra money toward the debt with the highest interest rate first.

This saves you the most money over time because you eliminate the most expensive debt first.

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If you had credit card debt at 24% and a car loan at 5%, which would you tackle first with the avalanche method?

The snowball method means paying minimums on all debts, then putting extra money toward the smallest balance first, regardless of interest rate.

Once you pay off the smallest debt completely, you roll that payment into the next smallest debt.

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Why do you think some people prefer this method even if it costs more in interest?

The snowball method works because of psychology. Getting that first debt completely paid off feels amazing and builds momentum.

You see progress faster, which helps you stay motivated through the long process of becoming debt-free.

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Which method - avalanche or snowball - matches your personality better?

Here's the key to both methods: you must make extra payments beyond the minimums. The strategies only work if you find extra money to throw at debt.

Look for ways to increase income or decrease expenses to fund your debt attack plan.

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What's one expense you could cut to speed up debt payoff?

Stay motivated by tracking your progress visually. Create a chart, use an app, or mark payments on a calendar.

Celebrate milestones along the way - each paid-off debt is a major victory worth acknowledging.

Engagement Message

How would you want to celebrate paying off your first debt completely?

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Let's practice both debt strategies! Imagine you have three debts:

Credit Card A: $2,000 at 22% interest Credit Card B: $500 at 18% interest Car Loan: $8,000 at 6% interest

With the [[blank:avalanche]] method, you'd pay extra on Credit Card A first because it has the highest [[blank:interest rate]].

With the [[blank:snowball]] method, you'd pay extra on Credit Card B first because it has the smallest [[blank:balance]].

Suggested Answers

• avalanche
• interest rate
• snowball
• balance