Should I Do The Debt Snowball or Avalanche Method?

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[ragescholar]

I got out of student loan debt using the debt avalanche. Hadn't even heard of Dave Ramsey at that point.
I think either way works fine, but it depends on your motivation:
The debt snowball helps you by motivating you with hope by decreasing the number of debts.
Whereas the debt avalanche, I believe, is more motivated by spite in ensuring that people make the least amount of money off you as possible. Though when it turns into "I can use all these tricks to game the system!", I think that's where bad ideas start.

[LeftEyeless]

I don't understand why everyone only mentions the behavior/psychology angle of the snowball, when there is also the cash flow angle. When you have a cash flow problem, eliminating several smaller monthly payments quickly frees up cash that can then be used to more effectively pay down the bigger debts or for emergencies.

[blueboat]

Having done both methods. The snowball creates momentum and emotionally fuels you. That's more important than change you save using the avalanche method.

[wickedglassbears]

If you’re living paycheck to paycheck or even short each paycheck then paying off the smallest debt first will at least get you to the point where you have money left over eventually. Debt snowball is best if you’re broke, but I imagine debt avalanche is better if you have debt, but you have decent cash flow and not really living paycheck to paycheck.

[ghostlyone]

To each his own. I invented my own method (self dubbed "meteor method"). This method probably works for the least number of people, but it motivated me because it was fun. I took the amount of money in my budget for paying extra on debt, then mathed out how to distribute the money amongst all my debts so that they all got paid off at the same time. So I made no progress for years and then one month (January 2021) I zeroed five student loans and a car loan. Nothing, nothing, nothing, then explosion of freedom, ergo, meteor method. Disclaimer: The meteor method is stupid and I don't recommend it for anyone.

[kaitiegeck]

Paid off >$300k in med school student loans using the avalance method...but would never knock the snowball method because I totally get that the psychology is a hugely important aspect of personal finance. We just knew we were super motivated to pay the loans off and move on with our lives, so the avalanche method worked for us.

[bovnycccoperalover]

In my mind, it doesn't matter as long as you stick to it.

[krispewkrem]

Avalanche is by far the best as it saves money and time. But it will only work if you budget the absolute maximum amount of money to toss at your highest interest loan.

Every month, you need to have a number. That number is the maximum amount of money you can spend on debt. Pay all your mandatory stuff like rent, utilities, car, phone, etc. Find the money you have leftover and just shovel it at debt. Focus on savings to an extent, such as emergency fund or at least have an emergency line of credit.

Snowball is satisfying because you take a small loan and pay it off, then take that money and toss it at another loan. It SEEMS like you are suddenly paying off more and more. You’re not. Just find a way to budget the highest amount possible and put it towards the higher interest loan.

It is faster and it saves more money. Snowball is stupid, but feels good. Avalanche is peak, but feels bad.

[aliciaz]

These two are the best together - if Dave isn’t there

[krobdawg]

We all know what the Ramsey team will say but either way is fine as long as it gets paid off

[jdbdidoek]

I prefer avalanche method because it is the mathematically cheapest and fastest way to pay off debt.

[fireseekerhim]

I actually did both the things George said not to do. In my pre-Dave years, I got out of debt by doing the avalanche method. I also, having never run before, trained for and ran a marathon before I started racing 5Ks. 😀😀😀

[angstfree]

Also, when you pay off the lowest item first you own the item. Car vs. House. Also, banks will work with you on house payment, car will just get repossessed if you miss payments.

[mhughes]

I would agree with Dave’s snowball method, however if you have gotten to the point or you have the the ability to do the avalanche method it seems to make better financial sense.
Personally I paid off the smaller ones and now I can make bigger payments on the biggest one.

[chaseboddicker]

I have worked both together. I received the lump sump from my tax return, which needs to be reworked, and used that to take out my largest credit card debt. Then, I took the month to month savings and applied it to the smallest one using snowball. Not the best method I am sure but it is working for me.

[Bigbilly-msbn]

As much as they say the name of the college doesn't matter it was hilarious to hear her say if harvard says it, I'm believing it.

[SnifferSock]

They should just say it's a mental thing. If you're super stressed paycheck to paycheck and are finally trying to take control of your life, sure, do the snowball. Higher risk of falling back into debt people also should use this method.

If you don't need the little rewards of a lower number of debts, then paying highest interest first makes more sense.

[chrisconsorte]

I just paid off my credit card. Next is my $13K car loan! Debt snowball works!!

[danidah]

I’d love to see a percentage of people that miss the free period versus those that pay them off in time. It is so easy to forget the deadline then get all those financing fees tacked on at the end

[ewitte]

The best plan is the one you stick to. I only had two bills (car $4k left) and a $10k emergency (10.9%) before I had the emergency fund over $1k. The car at 2.6% actually did make sense and saved interest. Because I was able to manage the remaining 18 car payments in 3 months. Fast enough to double the AC payments which mathematically was less interest even not doing anything else.