When it comes to dealing with debt, there’s a bunch of advice floating around on how to tackle it. As money experts, we wanted to weigh in on all the opinions and share our tips for success. Let’s start by reviewing the two most popular debt payoff strategies: The Avalanche method and The Snowball method.

The Debt Avalanche method suggests starting with the debt that has the highest interest rate.  And well, the math here checks out too. The idea is that by getting rid of those high-interest debts pronto, you’ll save money in the long run. Plus, who likes wasting money on interest??

But there’s another popular method of debt payoff at play here. It’s called the Debt Snowball method. This technique involves paying off the smallest balance first, regardless of interest rate. And this theory is backed by behavioral science. If you can get a quick win in your debt payoff journey, it’ll motivate you in the long-run to keep going with the rest of your debts. Plus, when you free up the money that was going to the smaller debt’s minimum payment, you’re able to snowball those funds into a larger payment towards the second debt, and so on! And not to name drop or anything but this is Dave Ramsey’s go-to method which is probably why you may be familiar with it already. 

Some people swear by the Avalanche. Others swear by the Snowball. So which is the best? It depends.

Mathematically, the Avalanche wins because you will in almost every scenario save money on interest. But behaviorally, the Snowball wins because you are statistically more likely to actually complete your debt payoff journey when you get those quicker wins out front. So, while you might theoretically save more money on interest with the Avalanche, if you fall behind in your debt payoff journey because you’re burnt out chipping away at a giant debt, it’s all for nothing. In the end, the consistency of paying off debts might be what actually saves you money on interest. 

Both math and behavior are crucial in money habits and decisions. So in order to pick the best debt payoff strategy, you gotta know yourself! If you’re good at consistently making payments, even when progress is slow, go with the Debt Avalanche – it could save you big bucks. But if you think you might struggle to stay on track without more frequent wins, try the Debt Snowball. Paying off your debt in full is worth more in the long term than saving on interest in the short term.

As for us, generally, we lean towards the Debt Snowball method – science has our back on this one. However, there are exceptions. If you have two debts close in balance, choose the one with the higher interest rate. If a particular debt is weighing you down emotionally, prioritize it, regardless of interest rates or balances. If you’re dealing with a crazy high-interest rate that’s bleeding you dry, maybe focus on paying off that debt first. It could mean reducing the balance, paying it off entirely, or even negotiating a new rate with your creditor.

In the end, the key to tackling debt is having a plan. You can stumble into debt, but you can’t stumble out of it. If you’ve been going in circles, it’s time to get intentional and plan your way to freedom. When less of your money is tied up in debt, you’ll have more to invest in your business and live the life you love. Which is really all we can ask for!