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Paying Off Debt: The Debt Snowball vs Debt Avalanche Method

by The Mom Trotter

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When it comes to paying off debt there are two ways of paying off debt that stand out, chances are you may have heard of them before, the debt snowball and the debt avalanche.

While you may have heard the terms you may not be familiar with the intricacies of them. What sets them apart from one another? Which one is right for you? In this article, I’ll help you answer all these questions as we compare debt snowball vs debt avalanche.

What is the Debt Snowball?

The debt snowball is a method of debt repayment that has been made popular by Dave Ramsey over the last few decades. It focuses on the psychological aspect of paying off debt by giving you a boost in confidence and a win as quickly as possible. The idea is quite straight forward.

Begin by making a list of all your debts from the smallest to the largest, excluding your mortgage if you have one. This is now the order you will pay off your debt. Make the minimum payments for all of your debts each month then focus any extra money you have on the smallest debt.

Once you’ve paid off that debt you should have a small celebration, you paid off a debt and you’re one step closer to financial freedom! Now that minimum payment and extra money you had going to your first debt can be moved on to the new smallest debt.

Now, the amount of money you have going towards paying off your debt has increased because you don’t have that old minimum payment. Once you’d paid off that second debt you move on to the third and once again the amount you’re putting towards the debt has grown.

This is why it is called the debt snowball. It’s just like making a snowman. You start with a small ball then roll that around in the snow, making the ball bigger and bigger. Only this time instead of snow you’re doing it with your money.

All along the way, you’re having small wins that help keep you stay motivated and stay on track. The debt snowball transforms debt from being a math problem to a mental exercise. 

So, to summarize the debt snowball:

  • Make a list of all your debts in order from smallest to largest (except mortgage)
  • Focus on paying off the smallest debt first then working your way up
  • Celebrate your wins, which are coming more often
  • Can make paying off debt easier by making it feel more rewarding

What is the Debt Avalanche?

Where the debt snowball makes debt into a mental exercise the debt avalanche makes it into a pure and simple math problem. Just like with the debt snowball you want to make a list of all of your debts.

Only this time instead of listing the debts from smallest to largest you will want to list them in order of highest interest rate to lowest, once again excluding your mortgage if you have one.

Yes, you are going to need to work out what your interest rate is for each of your debts if you don’t already know it. You will want to work on paying off the debt with the highest interest rate first. This may mean that you have to wait longer for your first debt payoff win, but by doing it this way you will actually be saving yourself money in the long run.

This is what is considered to be the more conventional and traditional way of paying off debt. But, it isn’t the best one for everyone. Dave Ramsey, a proponent of the debt snowball method has said that if people were good at doing math they wouldn’t be in debt.

While he does have a bit of a point the debt avalanche method cannot simply be ignored because of the massive benefits it does have. 

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So, to summarize the debt avalanche:

  • Make a list of all your debts in order of highest interest rates to lowest (except mortgage)
  • Focus on paying off the debt with the highest interest rate first then working your way to the lowest
  • In the long run, you will save money
  • It will be easier to fall off track as you don’t have wins as often and it can start to feel hopeless

Debt Snowball vs Debt Avalanche

So which one is better? Well, I can tell you now that the answer won’t be as clear as you hope it will be. It really depends on how your mind functions and which method feels right to you. For some people the debt avalanche is fantastic. You end up digging deep and staying on track the whole time.

When you come out of the other side you’ll have paid less money to pay off those debts. But, you could also fall off track, go back to your old habits and give up on being debt-free. It is much more challenging, though with its benefits.

With the debt snowball, on the other hand, you’ll have more wins which will keep morale high and make it easier for you to keep going. You’ll see your success without having to wait for ages and that does some very powerful things to your mind.

Talking to the kids about debt.

However, compared to the debt avalanche you will end up spending more to pay off your debt because you aren’t paying off those debts with the high-interest rate, meaning you’re paying more interest. For some people though, it might be worth that extra cost.

It means having peace of mind that debts are getting paid. That little motivational boost you get when you’ve paid off a debt is a powerful tool that cannot be denied. If at this point you still aren’t sure then there is a fairly simple way to figure out which method is the right one for you. Do the math.

Make the two lists, one for the debt avalanche and one for the debt snowball. Work out at your current rate of paying off debt how long it will take you to pay off all your debts doing each method and how much it will end up costing.

There are a few calculators online that will help you do the math for both. This one from Nerd Wallet is for the Debt Avalanche and this one, also from Nerd Wallet will calculate for the Debt Snowball method. Once you’ve done the math take a look at them.

  • How long will it be before you have your first win in each method?
  • How much money will the debt avalanche save you?
  • Which one feels better?

What Method Did We Use To Pay Off Debt?

Honestly, we are using a mix of both methods, and it is working very well for us. We started off with the Debt Snowball, and when we realized that we had a large sum of money, we decided to do Debt Avalanche and pay off our student loans once and for all.

Whew, we thought this day will never come! We still have a few loose ends to tie and we’ll be officially debt free. You can read more about our journey on this Instagram post below.

At the end of the day, the key here is to make sure to figure out what for you and your family. As long as you’re paying of debt, that’s what matters the most.

Anyone else on a debt free journey? I’d love to hear more about it.

Debt Snowball vs Debt Avalanche

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