Debt Snowball vs Debt Avalanche: The Two Best Ways To Pay Off Debt

Paying off debt can be overwhelming. As someone who has stared down the barrel of over $20,000 worth of debt, I have felt that inner dread and anxiety.

It sometimes feels like you’re climbing Mount Everest, with the summit nowhere in sight. 

There are two popular effective and efficient methods for tackling your debt, so that you can make the most progress and get to that summit as quickly as possible.

I believe the best method is the one that keeps you motivated to continue paying off your debt! 

First, here are 3 steps to take to prepare for paying off your debt:

1. Don’t Add More Debt

One thing that both the Debt Snowball and Debt Avalanche methods agree on is to stop piling on more debt. That means: Stop racking up your credit card balances. Don’t take out a personal loan. Avoid that persuasive Target employee’s tactics to get you to sign up for a Red Card. 

This may mean cutting down on a certain budget category or canceling subscriptions. Do whatever it takes to break even at the end of the month, and then work on having money left over at the end of the month. 

Check out this playlist on side hustle ideas to help increase your income.

It is also important that you never miss a payment on any of your debts. 

I recommend placing your debts on auto-payment to avoid any late charges and/or interest charges.

2. Write Down All Debt Totals

Having a budget is the best way to track all of your spending and track debt-payoff progress. 

When I was paying off my student loans, I kept track in my excel budget which is still the monthly budget excel template that I use today.

For each debt write down the following:

• Total debt amount

• Minimum monthly payment

• Interest rate

• Due date

3. Pull Your Credit Score

Pull your credit score to find all of the debts attached to your name. I recommend the free site Credit Sesame. This platform is user-friendly and will list all of the debts tied to your name.

While you’re pulling your credit score, check your credit report to see if there are any fraudulent debts listed.

Now that you know what you need to do to start your debt-free journey, you’ll need to determine which payoff method you want to use.

The Debt Snowball Method

The first of the two methods is the debt snowball method. With this method, you list all of your debts in order from smallest to largest balance – regardless of interest rate.

Then, you pay the minimum payments on all of your debts. Any money left over at the end of the month will go to the smallest balance debt. Tackle that debt with vengeance…with all of your financial power focused on eradicating that debt and only that debt. Keep following this process each month until the smallest debt is paid off.

Once your smallest debt is paid off you are going to CELEBRATE. Do a happy dance, go out to eat, and then move to the next smallest debt until all of your debts are paid off.

While working the debt snowball method, do whatever you can to bring in extra money. Work overtime, find side hustles, or cut expenses in your budget. Anything you can do to put extra money towards your smallest debt.

The major pros of the debt snowball method is that it is extremely motivating to have small wins as you are paying off debt. Every time you pay off a debt and move onto the next one, it feeds that internal determination to stay the course.

The Debt Avalanche Method

The second method is the debt avalanche method. This method will save you the most money  in the long run. With this method, you list all of your debts from highest to lowest interest rate.

Just like the debt snowball method, pay the minimum payment on each debt, attacking that first debt with vengeance.

The debt avalanche is the mathematically correct way, because you are paying off the debt with the largest interest rate in the very beginning, which in return will save you the most money throughout the course of your debt free journey.

The downside of this method is it can feel like you are never getting out of debt. If your highest interest rate debt is $30,000 and will take you 2 years to pay off, you won’t get a quick win. 

Both methods are great ways to pay off debt. The important part is deciding what motivates YOU.

If having quick wins along your journey motivates you, then the debt snowball is best for you.

If you are a numbers person and seeing how much money you will be saving is motivating to you, then the debt avalanche is best for you.

Whichever method you choose, I am cheering you on!

Ways I save money:

Here at Freedom In A Budget, I am all about saving money! Here are some of the EASY ways that I save money:

• Billshark negotiates lower prices on your monthly bills to save you time, money and hassle.

• Fetch Rewards is a free grocery savings app that rewards you just for snapping pictures of your receipts. That’s it. Really. Free gift cards on groceries on thousands of products every day, no matter where you get your groceries. 

Just scan your receipts and get gift cards from retailers like Amazon, Target, Ulta, Applebees. Use code QHKBH to earn 2,000 points ($2)!

• Credit Sesame offers Credit Score and Monitoring, Savings Recommendations and Identity Theft Protection. ALL FOR FREE.

• CIT Bank offers high interest savings accounts and CDs to provide a safe, secure way to earn money grow your savings.

• Gabi is a full-service, online advisor who compares all your insurance options to find you the right policy, all in under two minutes.

• M1 Finance is an easy to use brokerage platform that allows you to invest in Fractional Shares and auto reinvest!

• Webull Get 2 Free Stocks on WeBull when you deposit $100 (Valued up to $1400).

• Glasses USA Save money by buying your prescription glasses, contacts or prescription sunglasses online. They have an easy to use virtual mirror so you can see what they look like on and carry tons of name brands up to 65% off your first pair.