Avalanche vs. Snowball

Which Debt Payoff Method is Best for Your Debt Payoff Journey 

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“The average debt an American owes is $104,215 across mortgage loans, home equity lines of credit, auto loans, credit card debt, student loan debt, and other debts like personal loans.”  Debating between the avalanche and snowball methods for debt payoff? Discover which method is best for your journey.  The debate between the avalanche and snowball methods has been around for a long time. Do you pay off debt by saving money by paying off high-interest debt with the avalanche method or do you get quick small wins by paying off the lowest debt first? Paying off debt is an individual journey and what works for someone else may not work for you. Having a plan that works for you no matter what method you use or do not use or just maybe a combination of both would work for you. That is what we are trying to do in our personal debt payoff journey. We are still in the middle of our debt payoff journey.  We are using a combination of both methods. I go into further detail about this in Switching from Snowball to Achalvanch Methods and in my Debt Avalanche posts. 

In this article, we will explore the differences between the Avalanche Method and the Snowball Method, and how they impact interest rates, debt size, motivation, and overall progress. Helping you to make a decision on which method best suits your personality and your financial goals. Both methods offer two clear approaches to tackling debt. Ultimately finding the best fit for you is all that matters. 

Understanding the Avalanche Method

The Avalanche Method is paying off debts starting with the one that has the highest interest rate. Focusing on the debt with the highest interest rate first can minimize the amount of interest you pay over time, saving you money in the long run. It is a mathematically sound approach which makes it a popular choice. 

Identifying Your High-Interest Debts

When identifying high-interest debts for the Debt Avalanche method, prioritize debts based on interest rates to save money over time These are the debts costing you the most. Compile a list of all your debts along with their respective interest rates, and rank them from highest to lowest. If you have any credit cards with a 0% introductory interest rate, be sure to note the payoff date and the interest rate that will apply after the introductory period.

When you know all your high-interest debt, pay that one first while making minimum payments to the rest of your debt. Once the first debt is paid off, roll that debt payment into the next high-interest debt. The rollover will build momentum allowing you to pay off debts efficiently.

Breaking Down the Snowball Method

The Snowball Method is different because you are paying off debts starting with the smallest balance first, regardless of the interest rate. The idea behind this method is to gain momentum and motivation by quickly eliminating smaller debts, creating a sense of accomplishment that can inspire you to tackle larger debts. While it may not be the most financially efficient method, the Snowball Method can be effective for those who need  Quick small wins to stay on track with their debt repayment journey. 

Make a list of debts and monthly repayment amounts, start by focusing on the smallest debt first. Make minimum payments on all other debts, while putting as much money as possible towards paying off the smallest debt. As you pay off each debt, you can then roll the amount you were paying towards that debt into the next smallest debt. This creates a snowball effect, allowing you to pay off larger debts more quickly and efficiently.

Impact on Motivation and Progress

Mindset plays into paying off debt. When you are not in a great headspace your money is also not in a great place. How you talk to yourself about debt is more important than which method you choose. Telling yourself that it is impossible to ever get out of debt can make you do nothing about it and get even farther into debt.  The psychological aspects of debt repayment methods can have a significant impact on your motivation and progress towards becoming debt-free. By considering how different methods like the Avalanche and Snowball approaches can affect your mindset, you can better assess which method will keep you on track and motivated. If you know that your mindset is in a negative spot right now maybe the Snowball Method would be best to start with. However, if your mindset is more positive about debt the Avalanche Method may be better. Understanding this will help you make an informed decision on the best approach for your specific financial situation. You got this you can pay your debt off.

Choosing the Right Method for You

Now that you are aware of the key differences between the Avalanche and Snowball debt payoff methods, it's important to consider which one is best for your individual preferences and financial goals. Take into account your personal tendencies and mindset when it comes to tackling debt – are you motivated by seeing quick wins like with the Snowball method, or are you more focused on saving money in the long run as seen with the Avalanche method? Reflect on your own financial situation, including the types of debts you have, their interest rates, and your overall budget. By choosing the right method for you, you can set yourself up for success and hopefully, you will not be overwhelmed or stressed because you have made a choice that is catered to your needs and your life.

Examples of both the Avalanche Method and Snowball Methods

I used a debt payoff calculator to see which method would be best for this scenario as an example. For these examples, I used the average American debt, types of debts, average interest rates, and monthly payment amounts for each debt category. For the averages, I Googled the average of each item and went with the first one it gave me that if it was a range I just picked something in the middle. I tried to do a debt payoff budget of 20% of the average monthly income but with the amount of minimum payments could not make that amount work. Of course, this is not a perfect example because everyone’s debt payoff journey is unique.

Snowball Method

Staying Motivated Throughout Your Debt Payoff Journey

Setting Attainable Goals

Staying motivated throughout your debt payoff journey is crucial for success however it is not easy when you are starting at large amounts of debt. One way to stay motivated is by setting small, attainable goals along the way. Celebrate each win, whether it's paying off a credit card or reaching a certain percentage of your total debt paid off. By breaking your overall goal into smaller, manageable pieces, you'll feel a sense of accomplishment that will keep you driven to continue.

Visualizing Your Debt-Free Future

Another way to stay motivated is by visualizing your debt-free future. Create a vision board or list out all the things you'll be able to do once you're no longer weighed down by debt. Whether it's taking a dream vacation, buying a new car, or simply having peace of mind knowing you're financially secure, keeping your end goal in mind can help you push through the tough days.

Reflecting on Progress

The debt payoff journey may take several years to complete for some individuals.

There will be days when it feels like you're not making progress or that the end goal is too far away. During those times, remind yourself of your progress, sacrifices, and discipline. Reflect on the sacrifices you've made and the discipline you've shown to get to where you are now. With dedication and perseverance, you can stay motivated and reach your goal of becoming debt-free. 

In conclusion, understanding the differences between the Avalanche and Snowball methods can help you choose the right method for your debt payoff journey. Take some time to evaluate your financial goals and personality to determine which method aligns best with your needs. After evaluating your financial goals and personality to choose the right method, remember to believe in yourself and stay committed to your debt payoff journey.

Join us on our debt payoff journey and stay motivated to achieve your financial goals.