Debt Snowball vs. Debt Avalanche: Which is the BEST Way to Pay Off Debt?

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[thynnus]

I used a combination of the two methods. When I graduated college I had several student loans. The first thing I did was pay off the smaller ones (<$1, 000) to simplify my situation and get some quick wins. Once I just had a couple large ones left I payed them off by interest rate.

[BenjaminTVogt]

The avalanche method is best for those who are mathematically minded and financially oriented. The big asterix to this is those who are in consumer debt are typically (not always) not financially minded. The avalanche method immediately fails if a person gives up tackling their largest debt first - they need a victory as soon as possible. Even though mathematically avalanche is better, I believe snowball is more effective in the end when accounting for the human will.

[johnb]

time stamp of 17:50 when they finally start talking about the subject, so skip to that point if you dont want to sit and hear about the different type of debt, wasted so much time to get to the point of the subject.

[Natej]

The main problem I see with this illustration is that if you are really going to attempt the debt snowball, the goal should be to pay those debts off FAST! The main reason the avalanche looks so much better here is that the payoff is spread out over 5 years. If you sell stuff, get extra jobs and throw everything you can at the debt, the goal should be to pay it off in 1-2 years. Plus, a majority of people won’t have a debt at that 29.99% interest. They assumed here that the higher the balance, the higher the interest rate. More than likely the higher balance debts are cars and student loans while credit cards tend to be the lower balances (and high interest) that you are paying off early on anyway. The math gets much much closer when those things change. And at that point, the emotional wins of the snowball outweighs the much smaller financial savings

[jonathansaindon]

Another benefit of the snowball is that it frees up some cash flow for other things if needed. It’s more flexible.

[kflo]

Avalanche is how I paid off my student loans 4 years earlier than estimated. Now I'm helping my spouse.

[UncmmonSense]

I've always used the snowball method when I had debts I wanted to get rid of, primarily student loans and credit cards. Even thought my MBA mind says payoff the higher interest rate debt first, the problem is you don't see the results immediately, so it is easy to get sidetracked and frustrated. However, when you knock out a smaller debt, you see that it is gone and then it is easier to focus on the next larger one.

[nickdoyle-achievefinancial]

I'm always shocked at the misuse of credit cards and overspending on cars. These two things alone could mean the difference between ~broke @60 & millionaire.

[iamjacquesbarjon]

FTE Daniel has raised the quality of this show so much. Whatever yall are paying him, it's not enough.

[oyedread]

What is left out with the Debt Snowball is the ability for refinancing/ consolidating your debt. You really have to watch your items by a case by case basis and put a plan together. Just have a plan!! And stick to it. Know when you plan to be out debt!!!

[lucassende]

I've primarily used the snowball, but made an exception for 3 accounts that were significantly higher interest to the top. That worked for me as the snowball kept me motivated but the exception I made at the beginning used my dollar for effectively

[Onepointmessage]

To be clear, the debt snowball is not just about behavior. It is also about freeing up income to be able to add to the debt payment. If you were putting all your money in the highest interest-rate, but it is also a high level of repayment that is owed, it does not free up any income to be able to pay extra on debts.

[shannonzittlow]

I like what Dave says if debt was a math problem you wouldn’t be in debt in the first place :)

[Kevintendo]

I love the outro to this vid. It’s exactly what I plan on doing - coming to y’all for my financial planning needs when I reach the phase to need somebody 👏

[joshmartin]

Love your content. You guys do the math and that is great. Two things though, this obviously a cherry picked scenario that benefits your method vs debt snowball, and two Dave would tell people to sell stuff, get a second and third job, get intense and pay all this off in less than a year and be done with it. In paying debt off quickly the interest rate matters much less.

[danielovicens]

Thank you for the great advice and guidance.

[oldcountryman]

I went with the “debt nope” approach and it’s worked for my entire life.

[bkittle]

Cash Flow index is statistically the fastest taking out the human emotional impact. Balance/Payment, calculate that for all debt and put more money towards the lowest cash flow index first.

[lisandrasaumeldiaz]

You keep inspiring people to achieve independence. Thanks.

[BornToPun]

I'm currently in a situation where I have 3 small debts and 3 large debts. My plan is to snowball the small ones and avalanche the large ones.