Snowball tackles smallest debts first and can eliminate debt 80% faster, while avalanche targets highest interest rates but people abandon it because they spend the savings. A Roth IRA acts as a safety net alongside either strategy.
Dave Ramsey teaches the debt snowball. If you're in debt with a bunch of credit cards, student loans, la la la la, you build a debt snowball. The debt snowball is taking the smallest accounts first to the largest balances, putting them in a progressive order and setting aside just a few extra hundred dollars. And then keep making your minimum payments. But then you're going to allocate that extra money to the first one. As soon as you pay that off, you get out of debt 80% faster. The debt snowball. Well, there's also called the debt avalanche. It's a whole other concept. You actually don't put them in order of lowest to highest balances. You put them in order of rate and you pay off the worst interest rates first. Now, technically, the debt avalanche saves you money and you actually get out of debt faster too. The problem is human nature. People don't take that extra tax savings and make good decisions with it and reinvest the tax savings at the same rate. Technically they would end up maybe even a better spot, but people don't. The Roth IRA is like that human nature safety net that I know I'm never going to pay tax on it again.
The secret to managing your family's future #financialfreedom #estateplanning #shorts
Moving Property to an LLC: What They Don't Tell You #realestate #investing #tips
