Getting out of debt wasn’t a math problem. I understood the numbers. It was a head problem: giving up halfway, feeling like I wasn’t moving, paying a little on each thing and never seeing anything close. When I changed strategy I didn’t change my income; I changed the order I attacked in, and with it, how I felt.
There are two proven methods, and the difference between them is less financial than emotional.
Avalanche: the most expensive first
You pay the minimum on all of them and throw everything you can at the debt with the highest interest rate. When it falls, you move to the next. Mathematically it wins: you pay less interest overall and get out sooner. The catch is that the most expensive debt is often the largest too, so the first wins take a while to arrive, and that’s where a lot of people —me included, the first time— throw in the towel.
Snowball: the smallest first
Same thing, but you attack the smallest debt first, ignoring the interest rate. You pay a bit more overall, but you close debts fast. And every debt closed is a push, proof that the plan works.
I couldn’t keep going on willpower alone toward a distant reward; I needed to see progress along the way. Closing small debts, one after another, gave me exactly that: constant proof that the plan was working. Those little “dones” held me up more than any calculation.
Which to choose
If you can go a while without seeing results, avalanche: it saves you money. If you need wins to keep from quitting, snowball: it saves you the plan. There’s no universal right answer; there’s the one you’ll finish. The best method isn’t the most efficient on paper, it’s the one you keep doing in month six.
What doesn’t work —I tried it— is choosing neither and spreading with no direction. Choosing, even imperfectly, is half the battle. And closing the last debt didn’t make me rich: it made me free, which turned out to be what I was after all along.
We calculate your plan, month by month, in the course Personal Finance from Scratch.
Educational content. Not financial advice.