Get Out of Debt: Snowball vs Avalanche Method - Which One is Right for You?

You work too hard to stress about money. Car loans, college tuition loans, credit card debt, no matter what type, or how much debt you have, it can feel overwhelming. And even if you’re not overly consumed thinking about your debt albatross, chances are you’ve noticed the opportunities you’ve passed up because your hard earned money is shunted toward monthly payments.

The good news? Money doesn’t have to be stressful, in fact, it should (and will!) bring you new opportunities for joy. Instead of stressing about your debt, think about what your life will look like when you’re debt free. Eliminating debt is the first step toward finding true financial freedom and living life on your terms. So, where do you want to be?

Now that you have a new picture in your mind, let’s get started.

But first…

Before we dive in, it’s important that you let go of any shame or guilt you may be feeling about your debt. Almost everyone has been in your shoes at some point in their lives. You’re normal, you’re not alone and we’re here to help.

Now that we have that out of the way, let’s continue.

There are numerous ways to start the debt-slashing process, but in this article, we will focus on two of the most popular debt elimination strategies – the Snowball Method and the Avalanche Method. Which one is right for you? Let’s take a look at each method to help you make an informed decision as you start your journey towards a debt-free life.

The Snowball Method

The Snowball Method uses momentum and motivation for quick wins. By paying off your smallest debts first, regardless of interest rates, you’ll get those quick wins right off the bat.

Here’s how it works:

• List your debts from smallest to largest.
• Put as much money as you can toward the smallest debt while making minimum payments on the rest.
• Once the smallest debt is paid off, roll that payment amount into the next smallest debt.
• Keep going until your debt is paid off.

Benefits of the Snowball Method

The key to this approach is the psychological win you get from crossing off debts one by one. By paying off smaller debts first, you’ll likely feel a sense of accomplishment and progress early on, which can help you stay motivated as you continue to tackle your larger debts. Additionally, the snowball method simplifies your debt repayment plan by prioritizing debts based on size rather than interest rates, making it easier to manage and track your progress.

The Avalanche Method

The Avalanche Method prioritizes debts with the highest interest rates which can potentially save you money over the long term. Pay your debt off faster, and pay less in interest.

Here’s how it works:

• List your debts from highest to lowest interest rates.
• Focus on minimum payments for all but the highest interest rate debt.
• Use any extra funds to pay off the debt with the highest interest rate while making minimum payments on the rest.
• Once the highest interest rate debt is paid off, roll that payment amount into the next highest interest rate debt.
• Keep going until your debt is paid off.

Benefits of the Avalanche Method

The key advantage of the Avalanche Method is that it saves you money over the long term. By focusing on high-interest debts first, you minimize the amount of interest accruing over time, which saves you money and helps you pay off your debts faster.

The Choice is Yours

Now that you understand the differences between the Snowball and Avalanche methods, it’s time to choose the one that works for you.

To help you decide, ask yourself: What are my personal preferences? Which strategy best aligns with what I am trying to accomplish? Do I prefer one method over the other?

If you’re someone who is motivated by quick wins the Snowball Method may be the way to go. Or, maybe you’re motivated by long-term savings and financial efficiency, then the Avalanche Method might be best for you.

Whether you choose the Snowball, Avalanche, or a maybe a combination of both methods, it’s important to stay disciplined, consistent, and focused on your goal of becoming debt-free. With a a little determination and a good strategy (the one you’ll stick to!), you can stress less, live more and that debt-free dream will finally become your reality.

Here for you.

If you have any questions, or if you would like to discuss debt strategies in more detail, please reach out to our Debt Management Experts today.

Together, we will get you out of debt and where you want to be.