Debt Payoff Strategies: Snowball vs. Avalanche Method Explained

When it comes to paying off debt, two strategies dominate the conversation: the debt snowball and the debt avalanche. Both can help you become debt-free, but they work differently.

The debt snowball method focuses on paying off your smallest debts first, regardless of interest rate. List your debts from smallest to largest balance, make minimum payments on everything except the smallest, and throw extra money at that smallest debt until it's gone. Then roll that payment to the next smallest debt.

The debt avalanche method prioritizes debts with the highest interest rates first. You'll save more money on interest over time, but it may take longer to see your first debt paid off.

Mathematically, the avalanche method saves the most money. However, research shows the snowball method often leads to better results because the quick wins provide psychological motivation to keep going.

Consider your personality and financial situation. If you're motivated by seeing progress quickly, choose snowball. If you're disciplined and focused on minimizing interest costs, choose avalanche.

Whichever method you choose, the most important thing is to start. Every payment brings you closer to financial freedom.