Eric Rosenberg paid off $40,000 of student loan debt in just over two years using the debt avalanche strategy.
The key to making the debt avalanche work, he writes, was living on a tight budget and freeing up as much money as possible to put toward his debts.
His best advice to other people paying off debt isn’t specific to the debt avalanche — any debt repayment requires work, he writes.
In 2012, I followed the debt avalanche method to pay off my $40,000 in student loans from my MBA program exactly two years and six days after graduation.
I started my MBA program, with an estimated $90,000 cost of attendance, while making about $40,000 per year as a low-level financial analyst at a big company. I got a modest bonus and raise along the way, which did help me pay off my loans. But even with the raise, I made under $50,000 per year for most of my student loan payoff and under $60,000 over the entire payoff period.
How did I pay off my loans so fast while earning a modest income and making significant retirement contributions? Even though I was technically using the debt avalanche strategy, a big part of using it so successfully is that I lived on a tight budget. By keeping a laser focus on my monthly spending, I was able to squeeze out every penny for debt payments.
I also used automated payments and put every single lump income I earned into my loans. But at the core of the strategy was living on a college student budget in an inexpensive apartment with low bills.
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The debt avalanche starts with the highest-interest loans
The debt avalanche is a twist on the popular debt snowball debt payoff plan. With a debt snowball, popularized by money guru Dave Ramsey, borrowers order their loans by balance and pay them off from smallest to largest. The debt avalanche uses a more mathematically beneficial approach, ordering loans from highest to lowest by interest rate.
Once your loans are organized on a spreadsheet or other tracker, which can be as simple as a sheet of paper, you can put the plan into action. You pay the minimum payment to every loan, and then as much as possible to the one with …read more
Source:: Business Insider