The most effective way to pay off debt depends on your personality — here are 3 methods to consider

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Start here. Flickr / drp

According to Beverly Harzog, author of “The Debt Escape Plan: How to Free Yourself From Credit Card Balances, Boost Your Credit Score, and Live Debt-Free,” there is no one right method to paying off debt.

“The objective here is to put yourself in the best position possible for success,” Harzog explains. “If the method you choose works, it’s the correct way for you.”

In her book, Harzog outlines three different strategies for debt payment and then highlights which personality types will find each method most useful.

Take a look:

Debt avalanche

Also known as the debt stacking method, the debt avalanche involves paying off the debt with the highest interest rate first, according to Harzog. Once you’ve paid that debt off, you start on the debt with the next highest interest rate, and so on. The idea of prioritizing by interest rate is based on the fact that the higher the interest rate, the more the debt will cost you over time.

Works best for: “Wealth accumulators” who keep an “enviable emergency fund” and like to plan ahead for retirement, since this method saves the most money out of the three. Harzog says that bargain hunters who are “frugal and focused” and “tightwads” who save out of fear of ending up homeless “might appreciate the logic and money-saving approach in this method.”

Debt snowball

This is the method most often associated with personal finance expert Dave Ramsey. “The success of this method relies on the idea that paying off your smallest balance first will give you a big psychological boost,” Harzog writes. “That boost, in turn, gives you momentum to stay motivated and continue paying off your debt.”

The author points out that moving from your smallest debt to the next smallest debt doesn’t take into account interest rates, so you’ll probably pay more in interest — and therefore more overall — if you decide to go with this strategy.

Works best for: Those who create budgets but have trouble sticking to them (because they just can’t resist impulse buys), since emotional shoppers might do well with a psychological boost. Harzog also suggests that those who take a “free-spirited approach to money and life in general” consider this method. “Getting quick wins along the way might actually keep this type motivated,” she writes.

For inspiration, check out this couple who paid off $US92,000 of debt in less than three years using the snowball method.

Debt blizzard

This strategy was developed by the author herself. Harzog says the debt blizzard “combines the best aspects of the debt snowball and the debt avalanche methods.” She continues, “This is for those who want a quick fix, but who would also rather save on interest expense in the long run.”

The debt blizzard involves paying off your smallest debt first (as an initial motivational boost) and then paying off the rest of your debts according to which ones have the highest interest rates.

Works best for: Those who have trouble sticking to their budgets, bargain hunters who are “frugal and focused” and those who are “free spirits” with their money.

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