There are two main approaches to paying off debt: the debt snowball and the debt avalanche.
With the avalanche method, you put your debts in order from the highest interest rate to the lowest one. Then you pay them off in that order.
With the snowball method, you pay off your debts in order from smallest to largest balance.
When you finish paying off a debt with either method, you take the payment you were making on that debt and apply it to your next debt, creating momentum that allows you to attack the debt with even more vengeance.
The avalanche method saves you money on interest payments. For this reason, math nerds love the avalanche method about as much as they dislike the snowball method.
Despite the numbers, you might not want to discount the snowball method. That’s because the snowball provides quick wins that motivate you to keep going. After all, if we all made completely rational choices around money, we wouldn’t need any debt-payoff methods.
Why the Debt Snowball Method Works
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You probably won’t want to quit smoking or drinking if you can’t see the damage it’s doing to your body. It’s when you feel and see the effects that quitting becomes a priority.
In behavioral economics, the idea is known as bounded rationality — that our ability to make rational decisions is bounded by our own limited knowledge. Feedback plays an essential role in whether we continue doing something or stop it.
Now apply the same concept to paying off debt. Throwing painful sums of money to the wind every month — with no feedback or affirmation that you’re getting somewhere — makes it much harder to stick with the process.
That’s why even though it may seem like you’ll pay more interest with a debt snowball, you may actually pay less. Continual positive feedback often helps you achieve goals faster than continual math calculations would.
We talked to six people who modified the debt snowball to make it work for them — and to help them pay off over $171,000 of debt between them.
April and Jason Snowballed Their Avalanche
When April and Jason Vargo started tackling their debt, they decided to pay it off by snowballing their payments.
Their debt consisted of credit card balances, car loans and a mortgage. Instead of starting with the smallest debt altogether, they started with their highest-interest debt, which was what they owed on credit cards, and focused on the card with the smallest balance first. In just a year in a half, they paid off $47,000 in debt.
To find extra money for payments, the couple held monthly meetings to evaluate every expense. But they made sure to budget for some fun stuff every month, too.
“Make sure you’re both comfortable with the plan,” April said. “Do something that makes you excited about it. Give yourself rewards.”
Brittney and Ryan Paid Off Debt While Making Room for Travel
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Brittney and Ryan Lynn amassed a little over $50,000 in debt from student loans, credit cards and a personal loan. After listening to financial guru Dave Ramsey’s podcast, they decided to take the snowball approach to paying off their debt.
“The way we think about finances isn’t always logical,” Brittney said. “If we had chosen a larger debt to pay off, it would have taken so long to reach a win. We might not have continued.”
Because they saw the progress they were making, they were motivated to keep going — and quickly. They paid off their debt in just two and a half years. The positive affirmations kept them from feeling guilty about indulging in their passion for traveling.
“I know we could have paid off our debt sooner if we didn’t travel, but it was important to us to stay excited and not totally dread life with some of the lifestyle changes we made,” Brittney said.
Amanda Got Help From a Credit Counselor
After Amanda Krill racked up $64,000 in credit card debt, she got help from a credit counseling company.
Amanda made monthly payments to the company, which doled out payments on her behalf, starting with her debts with the highest interest rates. When she could, she made extra payments on whichever card had the smallest balance.
This strategy gave her the math benefit of the avalanche and the psychological benefit of the snowball.
“That way, [the debt] was getting a double dose, and before I knew it, it was gone — and I felt great about eliminating one of my debts,” she said.
Lauren Covered Her Bases With Autopay
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Lauren Bowling lived in New York City on a $45,000 salary and was still able to pay off $10,000 of credit card debt in 14 months.
Instead of having someone make minimum payments for her, she just used the autopay feature on her cards to assist her debt snowball.
“I had autopay set for the minimum payments and used the snowball method to pay my debt down faster,” Lauren said. “Once I paid off a card, I routed that minimum payment to the next card, and so on.”
She made extra payments on whatever card she was working on, no matter how small they were.
“Whenever I had an extra cash left over at the end of the month, I’d make an extra payment,” she said. “It was slow going, but every little bit — and it was always just a little bit — helped.”
Jen Smith is a staff writer at The Penny Hoarder. She gives money-saving and debt-payoff tips on Instagram at @modernfrugality.
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