When it comes to debt payoff there are two popular strategies. These strategies are known as the “debt snowball” and the “debt avalanche”. These two popular strategies to pay off debt take advantage of human psychology or mathematics to help you pay off your debt faster.
Which debt payoff strategy you choose depends on your situation. Choosing one method vs the other may mean you pay your debt off faster OR it could mean you take longer to pay off your debt and end up making more interest payments.
The problem is that everyone in different and there isn’t a one-size-fits-all strategy. We have different amounts of debt. Our debt is spread over different accounts. And those accounts carry different interest rates (And to make it even more complicated, some kinds of debt let you reduce payments in difficult times, like some student loans, which can be a very valuable benefit!).
On top of this we all value things differently. Some of us prefer that immediate feedback (even if it means paying a bit more in the long run). Whereas some of us prefer to delay gratification a little bit, as long as it’s worthwhile in the end.
Choosing the right debt pay down strategy will depend on your personal situation and who you are as a person. In this post, we’ll summarize the two different methods and propose a third method that combines the best of both worlds.
We’ll also show you a cool little debt calculator that will help you decide which debt to pay off first.