Basics - Your Debt Reduction Plan - Snowball, Avalanche or frustration?

When it comes to your debt reduction plan there are numerous options but I will cover the most talked about ones in detail.  Regardless of which you choose, you need to get a whiteboard, scrap paper or spreadsheet and to compile a list of all debts.  We want to know your current balance, interest rate, available credit, and of course when it's due each month.  All of this is available on your monthly statement.  

1) The old tried and true pay the highest interest first method also called the avalanche.  This is the method Suze Orman advocates regularly.  Basically look at your list and whichever one has the highest interest rate gets paid off first then the next, right down the line.

2) Debt Snowball is Dave Ramsey's method.  Take a look at your list and find the one with the lowest balance, attack that one first.  This method may not make sense on your calculator but it does provide stress relief.  If you are currently opening 10 credit card bills in a month and can within a few months reduce that to 6, you have cut 40% of the worry.

3) The frustration method isn't really a method at all it's simply kicking the bully out of your life.  Take a look at your list, which one causes you the most anger, frustration or heartache?  Choose that one first.

4) Debt to income makes no sense to me.  This is essentially choosing the one that's the closest to its limit.  While this is important to your FICO score, you should not be worried about that while in debt.

So which one is best?  Much like a diet, the most effective one is the one you stick with long term.  I personally started with the debt snowball until I got down to the large balances and then switched to highest interest first.  In short, do what works for you.