Debt Snowball & Debt Avalanche

What is the first step in the debt snowball method?

• Pay off the debt with the highest interest rate first

• List debts from smallest to largest by dollar amount

• List debts from highest to lowest interest rate

• Make minimum payments on all debts

What is the main psychological benefit of the debt snowball method?

• It saves more money in the long run

• It focuses on high interest rates first

• It is easier to manage

• It provides small psychological wins

What is the primary difference between the debt snowball and debt avalanche methods?

• The interest rates of the debts

• The total amount of debt to be paid off

• The minimum payments on the debts

• The order in which debts are paid off

According to the debt avalanche method, how should debts be prioritized?

• Randomly

• From highest to lowest interest rate

• From smallest to largest by dollar amount

• From largest to smallest by dollar amount

What type of interest rate did the predatory credit card have in the example?

• 6%

• 19%

• 21%

• 4.7%

How much total interest was saved by using the debt avalanche method in the example?

• $861

• $1,200

• $620

• $359

What is the purpose of maintaining minimum payments on other debts while focusing on one?

• To accumulate more debt

• To avoid late fees

• To increase credit score

• To reduce the principal amount

Why is it important to have a written budget according to the video?

• To track every dollar and know where it's going

• To impress friends and family

• To avoid paying taxes

• To invest in the stock market

What does the debt snowball and avalanche methods aim to achieve?

• Buying more assets

• Being debt-free

• Financial independence

• Increase in debt