Debt Avalanche vs Debt Snowball Method (One is Better!)

A look at the debt snowball method vs the debt avalanche method. 2 different approaches claim to be the better way to pay off debt. But is one truly a better method? The debt avalanche involves lining up your debts from highest interest rate to lowest interest rate. Start by putting all extra money towards the highest interest rate debt first, until it is completely paid off, then move down the line. The debt snowball involves lining up your debts from smallest to largest amount owed. Start by tackling the smallest debt first.

The debt avalanche makes more sense mathematically to get rid of the higher interest rate debt first. However, the debt snowball provides more psychological benefits. By paying off small debts first, it helps the person build momentum and feel a sense of accomplishment. Which in the long run (according to 2 research articles mentioned in this video) people were more likely to completely pay off their debt while utilizing the debt snowball method vs debt avalanche. The savings you would earn by using the debt avalanche method were very minor compared to the debt snowball and the psychological benefits of the debt snowball motivated people to stick with it to the end.

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This video is not sponsored. Some product links are affiliate links which means if you buy something I may receive a small commission at no extra cost to you. This is not investment advice.

#timwolffe #personalfinance

[onegoalfinanceadmin]

Hey Tim, great video and thorough explanation of the two approaches!👏 Thank you! We'll be recommending this video to our users

[TheDeandrewoods]

I really enjoyed this video, thank you!