Debt Snowball vs. Debt Avalanche: Which Method is Right for You?

Getting out of debt is a journey, and like any journey, you need a map. The two most effective maps for navigating debt repayment are the Debt Snowball and the Debt Avalanche methods. Both work, but they appeal to different psychological needs.

The Debt Snowball Method

Popularized by Dave Ramsey, this method focuses on behavior modification over pure math.

How it Works:

1. List your debts from smallest balance to largest balance, regardless of interest rate.
2. Make minimum payments on all debts except the smallest one.
3. Throw every extra dollar you have at the smallest debt until it is gone.
4. Once the smallest debt is paid, roll that payment amount into the next smallest debt.

The Pros: Quick wins. Paying off that first small debt gives you a psychological boost and motivation to keep going.

The Cons: You might pay more in interest over time because you aren't tackling high-interest debt first.

The Debt Avalanche Method

This method focuses on the mathematically optimal way to pay off debt.

How it Works:

1. List your debts from highest interest rate to lowest interest rate.
2. Make minimum payments on all debts except the one with the highest rate.
3. Attack the highest-interest debt with all your extra cash.
4. Once paid off, move to the debt with the next highest rate.

The Pros: You save the most money on interest and get out of debt slightly faster.

The Cons: It can take a long time to see the first debt disappear, which can be discouraging.

Which Should You Choose?

The best method is the one you will stick to.

• If you need motivation and quick wins to stay on track, choose the Snowball.
• If you are disciplined and motivated by saving every penny possible, choose the Avalanche.

The most important step is simply to start.