Debt Avalanche Vs Snowball – Which Is Best?

When you are drowning in the ocean, it can feel overwhelming and emotional. And you are likely to be confused about how to effectively deal with it and recover from it. If you want to pay off your debts, you can use these two popular strategies. One is the debt avalanche and the other is the debt snowball. Both of these strategies are definitely intended to help you learn how to effectively deal with your debts and recover from them. But they both work in different ways. The first is the debt avalanche, which focuses on saving you money on interest by targeting your highest interest debts first. The other is the debt snowball method, which can provide motivation by allowing you to pay off smaller debts quickly.

There are many details to each method, but before we get into that, it’s important to first understand the overall landscape of debt management. Sometimes, when people are struggling to pay off their debts, they explore various debt relief options that can help ease their financial burden.

However, if you are confident that you can handle your debts on your own, it is essential to choose the best method that suits your financial goals and personal preferences. So, here we will take a look at the Debt Avalanche and Debt Snowball methods one by one to help you decide on the right method that suits your preferences.

Understanding the Debt Avalanche Method

The debt avalanche method is generally referred to as a strategy and savings method. Here’s how it works.

1. List Your Debts: Start by listing all your debts from highest interest rate to lowest interest rate.
2. Focus on the Highest Interest Debt: Once you have your list, focus on paying off the debt with the highest interest rate while making minimum payments on your other debts.
3. Move Down the List: Once you’ve paid off the highest interest debt, move on to the next debt and focus on paying off the debt one by one.

Benefits of the Debt Avalanche Method

• Saves Money on Interest: You should first target the debt with the highest interest rate. This will significantly reduce the total interest you pay over time. So this will help you save. Especially if you have credit cards with high interest rates, this will definitely lead to savings.
• Faster Debt Payoff: Since you are focusing on the debt that costs you the most and trying to pay it off completely, you will definitely see your overall debt paid off much faster compared to other methods.
• Logical Approach: The debt avalanche is a good way to take a systematic approach to debt repayment.

Drawbacks of the Debt Avalanche Method

• Less Immediate Satisfaction: When the amount of debt you pay becomes a large amount, it takes a long time to pay off its interest rate. That is, when you pay off a large amount of debt, this method will not encourage you because it will take a long time to complete it.
• Requires Discipline: If your intention is to provide quick results, this method will definitely be a challenge for you. This is usually a method that is effective for paying off high-interest rate loans. So if we expect quick results in this method, we will be disappointed.

Understanding the Debt Snowball Method

On the other hand, the debt snowball method takes a different approach when comparing the Debt Avalanche method. It only focuses more on psychology than math. We will discuss here how it will work:-

1. List Your Debts: In this method, the first thing you need to do is list your debts. When you list your debts, list them all from smallest to largest.
2. Pay Off the Smallest Debt First: Here, all you need to do is follow the method that helps you pay off the smallest debt first. Pay off only the smallest debt and pay the minimum amount for all other existing debts. Use the extra money only for the smallest debt that you pay off.
3. Celebrate the Small Wins: Pay off the small debts here and find satisfaction in that. Once you pay off that smallest debt, go to the next smallest debt and handle the necessary steps to pay off that debt.

Benefits of the Debt Snowball Method

• Motivation from Quick Wins: One of the most important benefits of the snowball method is that it gives you motivation. You will feel motivated by paying off a small debt quickly. Paying off a small debt and celebrating that success will give you the motivation to tackle your larger debt.
• Simplifies Focus: Since you are only focusing on one small debt at a time, you will not perceive it as a big burden. You will feel it as a small burden.
• Adaptable to Your Situation: This method is very flexible if you need to adjust how much you pay each month if your financial situation changes.

Drawbacks of the Debt Snowball Method

• Potentially Higher Interest Costs: You will focus on smaller debts first in this method. This may result in you paying more interest overall. If your debt is large, you will have to spend more interest here. This means that you will have to spend more money on debt compared to the previous method.
• Longer Payoff Timeline: If smaller debts have lower interest rates, it may take a long time to pay off your entire debt. This can put a heavy burden on you and affect your financial freedom.

Which Method is Right for You?

Choosing between the debt avalanche and debt snowball methods really comes down to your personal preferences and financial situation. Here are some questions to consider:

• What motivates you? The debt snowball method is a great option for you if you want to pay off all your small debts quickly and increase your motivation. On the other hand, the avalanche method may be better if you want to take an approach that will save you more money over time.
• What does your debt look like? First, keep track of your debt levels. Next, look at their interest rates. If you have more large, high-interest loans than low-interest loans, the avalanche method is for you. It can save you a lot of money.
• How disciplined are you? If you are someone who values ​​motivation and you don’t think a long repayment period will hurt you, then the snowball method is the method for you. This method is for you if you want to make quick progress and gain motivation within yourself.

Combining Approaches for Success

The most important thing to note here is that you don’t have to stick to just one of these two methods. You can use both methods depending on your situation. Some people use both avalanche and snowball. For example, if you want to make quick money, you can pay off two small debts. Then, after you have paid off the two small debts, you can focus on the higher interest debts. By doing this, you can follow both methods and be successful.

Both of these approaches have their advantages and disadvantages. So, you need to follow a good strategy and handle both of them neatly. If you need a boost, you can pay off the small debts and then switch to the remaining one large debt. Thus, you should use both of them according to your situation.

Taking Action: The First Steps

Be careful about which method you choose according to your situation. You should first start by listing your small and large debts. Then examine your goals and preferences. Taking all of this into consideration, create a plan that suits you. Here are some actionable steps to get you started:-

1. Gather Your Debt Information: First, list all your debts, including your balances, interest rates, and minimum payments.
2. Choose Your Method: Depending on your economic and financial situation, choose whether you are going to use the debt avalanche, the debt snowball method, or a combination of both methods.
3. Create a Budget: Establish a budget that allows you to allocate extra funds toward your debt repayment.  You can pay off your debts faster by creating a good budget. So create a good budget with the aim of creating additional funds for your debts.
4. Stay Motivated: Keep track of your progress and motivate yourself. Celebrate small victories. It will give you a boost to your big success.

Final Thoughts: Empowering Your Financial Journey

It is important to understand the differences between debt avalanche and snowball methods because you can only make a good decision if you understand the benefits and differences between the two methods. The main thing to consider here is whether you prioritize paying off high-interest debts or are looking for a way to pay off a large debt through small wins.

The key is to find the method that resonates with you and empowers you to take control of your finances. Remember that debt is not just a number. Getting out of debt is not a matter of numbers. It depends on your current financial situation, economy, and mindset. So you can approach this with a proper plan and strategy to make progress towards your financial freedom and succeed in life.