To Go High Or Low


One of the perhaps hardest choices a person or a couple may make in their journey to win with money is what kind of debt to tackle first. Should you pay down the highest interest rate debts first regardless of balance? Or should you start with the lowest balance first regardless of interest rate?


This usually boils down to a difference in objectives.


For the interest rate strategy, the goal is to save money by having less interest charged while paying down the debt. The less amount of the principal of the loan, the more money saved in the long term. This can be a valid strategy and I have seen it accomplished. The positive side is that it should save you more money in the long term. However it may take a longer time to see any debt actually paid off to see the process working.


With paying down your lowest balance first, the goal is to see the process working quickly to prove that more success is possible. It doesn't require as much persistence usually to see the first debt be paid off. After at least one debt is paid off, the payment being made is rolled into the debt with the next lowest balance and the snowball continues. The downside is you may end up paying more in interest depending on your other debts and interest rates.


My personal preference is to see the lowest balances paid off first. I strongly believe that seeing the first success will help provide hope and drive to continue to pay off the other debts quickly. Maybe a desire to feel that win again can drive that behavior!


In the end, the choice is completely yours as to which strategy you wish to use. You can even choose a different strategy altogether as there are more paths to debt freedom than these two I have laid out.


Which path will you choose to pay down debt and keep more of your money? Whichever road you take, seeing it through to the end is what will make all the difference.