Week 6: What is the snowball vs. avalanche debt repayment method?

The best debt repayment strategy is the one you can stick with! Credit cards are just toxic to your finances so while either of these methods can bring success, aggressively tacking high-interest, unsecured debts are where I generally advise clients to start first.

Two popular repayment methods are the Snowball and the Avalanche methods. Both are effective, but they take different approaches to getting you to a debt-free life. Let’s break them down so you can choose the best fit for your financial journey.

The Snowball Method: Build Momentum Fast

With the Snowball Method,

• You focus on paying off your smallest debt first while making minimum payments on everything else.

• Once that smallest debt is gone, you roll the amount you were paying into the next smallest debt, and so on.

Steps:

1. List your debts from smallest to largest (ignoring interest rates).

2. Pay as much as possible toward the smallest debt while making minimum payments on the others.

3. Once the smallest debt is paid off, roll that payment amount into the next smallest debt.

4. Repeat until all debts are gone!

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The Avalanche Method: Save More on Interest

The Avalanche Method 

• prioritizes paying off the debt with the highest interest rate first while making minimum payments on others.

• Once that high-interest debt is eliminated, you move on to the next highest.

Steps:

1. List your debts from highest to lowest interest rate (ignoring balances).

2. Pay as much as possible toward the highest-interest debt while making minimum payments on the others.

3. Once the highest-interest debt is gone, roll that payment into the next highest interest debt.

4. Continue until all debts are paid off.

Which One Should You Choose?

• If motivation is your biggest challenge: Go with the Snowball Method to gain confidence with small wins.

• If saving money on interest is more important: The Avalanche Method will cost you less in the long run.

• Want a mix of both? Start with the Snowball to gain momentum, then switch to the Avalanche for efficiency.

No matter which method you choose, the key is consistency. Commit to your plan, avoid taking on new debt, and watch your financial freedom grow.