Debt snowball vs. avalanche: Choosing the right debt payoff method

Paying off debt can feel like an uphill battle. Every statement, every minimum payment and every interest charge can be a reminder of the work ahead. If you're juggling multiple debts, it's natural to feel unsure where to begin.

You don't have to tackle it all at once. You just need a plan.

Two popular debt repayment strategies—the debt snowball vs. avalanche methods—offer distinct approaches to paying down what you owe. While the debt avalanche focuses on minimizing interest costs, the debt snowball prioritizes early wins to keep you motivated.

Let's break down each approach to help you choose the path that fits your financial situation and mindset.

The debt snowball method focuses on paying off your smallest debts first, regardless of their interest rates. Here's how it works:

1. List all your debts and prioritize them from smallest to largest balance.
2. Continue making minimum payments on all your debts.
3. Based on your monthly budget, figure out what extra you have for debt repayment.
4. Put that additional amount toward the debt with the smallest balance. When it's paid off, redirect the total payment you were making on it to add when paying down the next smallest.

As the name implies, this strategy creates a "snowball" effect as you pay off one small debt and then free up more money to pay down the next and the next until all your payments are going toward your last biggest debt.

The idea behind the debt snowball method is simple: Momentum and motivation matter. You build confidence and stay motivated by achieving quick wins. While this approach doesn't prioritize interest savings, its focus on progress works well for those who need encouragement to stick with a repayment plan.

The debt avalanche method prioritizes paying off debts with the highest interest rates first, regardless of the balance. Here's how it works:

1. List your debts and prioritize them in order from the highest to the lowest interest rate.
2. Continue making at least the minimum payment for all your debts.
3. Based on your monthly budget, figure out what extra you have for debt repayment.
4. Put that additional amount toward the debt with the highest rate. When it's paid down or off, target the one with the next highest interest rate.

With each payment, you're preventing future interest costs, giving you more resources to put toward the next debt and creating a cascading—or "avalanche"—effect.

This method minimizes the total interest you pay over time, making it the most cost-efficient approach. While it might take longer to completely pay off your first debt compared to the snowball method, the savings can be substantial.

Both methods offer structured approaches to paying off debt but differ in their priorities and outcomes. While the snowball method focuses on building momentum by tackling small balances first, the avalanche method emphasizes saving money by addressing high-interest debts.

The right choice depends on your financial goals and personal motivation style.

Either method is effective if you follow it consistently, so consider creating a spreadsheet or chart to track your progress. It can give you the emotional payoff of seeing your debt shrink over time. Choosing the approach that aligns with your mindset and goals helps you stick with your plan to pay down debt.

• The debt snowball method may be better if an increasing series of wins is what you need to stay committed.
• The debt avalanche method might be right for you if a steady pace that minimizes costs over time is motivating.

The "best" approach doesn't have to be rigidly following one or the other. You can combine strategies to pay off debt in a way that fits your needs. For example, you might stick with the snowball method for your day-to-day debt repayment, enjoying the momentum of clearing smaller balances. But if you receive a windfall—like a tax refund, bonus or unexpected cash—you could apply that lump sum toward your highest-interest debt, effectively sampling the avalanche method to maximize savings.

Before committing to either strategy, have an emergency fund in place and a budget to allocate as much as possible toward your debt. This helps you avoid taking on more credit card debt for things like an unexpected medical bill or car repair, which could derail your progress toward becoming debt-free.

That depends on your goals, financial situation and what motivates you most.

Here's one more overview of the debt snowball vs avalanche to help you find the right strategies to pay off debt.

Ultimately, the better method is the one you'll stick with. Whether you choose snowball, avalanche or a combination of both, having a plan—and sticking to it—puts you on the path to making your debt manageable.

The journey to paying off debt is personal, and there's no one-size-fits-all solution. The debt snowball method builds momentum through quick wins, keeping you motivated, while the debt avalanche method focuses on saving money by eliminating high-interest debts first. The most important thing is to choose the best strategy for your financial situation and mindset and stay consistent.

If you're unsure where to start, meeting with a financial advisor can help you evaluate your options and create a debt repayment plan tailored to your goals. Whether you want a plan to stay motivated, save on interest, or both, taking action today will steer you toward a stronger financial future.

Don't wait—get started on your debt-free journey. Connect with a local Thrivent financial advisor to explore the best approach for your needs.