Winter for Debt — Snowball or Avalanche?

I think by now most people have heard about Dave Ramsey’s ‘debt snowball’ pay-off method. If you haven’t, I’ll sum it up quick: you pay minimum payments on all your debts, as you likely already do, but then you take any excess money you have and put it towards your smallest debt. Once that debt is paid off, you do the same with your next smallest, and so on until you pay off your debts completely. Sounds satisfying, right? But does it make the biggest impact in debt?

The answer: sometimes. But most of the time, the ‘debt avalanche’ method saves you more money. And if you need to save all the money you can, and can trust yourself to stay motivated, this method might be better for you.

If you haven’t heard of the ‘debt avalanche’ method, it’s basically the same as the snowball, but you tackle the highest interest rates first. Not as satisfying, as you can’t see the results quite as quickly, but you tend to pay less interest over a very similar amount of time.

If you’re like me, that knowledge alone is enough to sell you on the avalanche method. But, here’s the part you need to ask yourself, and don’t lie to yourself:

Can I stick to my pay-off goals over several months, possibly even years, if I’m not seeing results?

Dave Ramsey is right, motivation is a major key to paying off debt. It’s hard to stay focused on something if you aren’t seeing results, and I know I have trouble with this sometimes. Just like with weight loss goals, most people prefer fad diets, losing weight quickly and effortlessly. That’s NOT the best way to lose weight, but most people have trouble sticking to the harder ways. So if you need to use the snowball method just to stay motivated, that might be worth paying more in the long run.

If you’re undecided, and need a calculator to break down the differences in these two methods for your specific situation, here’s a handy tool I found:

Debt Snowball & Avalanche Payoff Calculator

I hope this helps you as much as it helps me! Feel free to comment on here with tips for others to stay motivated, or share your own plan or experience with either method (or another method you used).

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