There are many ”expert” methods out there to help you tackle you debt. The two biggies being the ”Snowball” and ”Avalanche” methods but there are other, unique, methods too. We listen to other people all too often not looking at our own situation and analyzing it. Experts try and tell us that their method is the best and we listen to them. We, as a society, don’t question things enough.
Snowball Debt Repayment
This method, probably made most famous by Dave Ramsey, suggests organizing your debt payoff in such a way that you pay them off according to size from smallest amount to largest. The logic being we gain debt payoff momentum and are more encouraged to continue on in our efforts when we see results and gain the satisfaction of paying things off. The big drawback to this method being you could likely end up paying more in interest since interest rate isn’t taken into consideration when prioritizing.
If you’re the type of person who gets excited about paying something off in full (rather than just paying a balance down) this method will likely work well for you.
Avalanche Debt Repayment
Interest rate is taken into consideration with the repayment option. Organizing your debt from highest interest rate to lowest and start repayment accordingly. This method ensures you’re debt free and paying while paying the least amount of interest.
To me this method makes the most sense. While I understand the logic behind momentum gained with the snowball method, if you were to calculate potential interest paid between the two one may be inclined to switch methods.
Which is Best For Me?
Snowball doesn’t work for me because I lose thousands in interest and I like the idea of paying as little as possible, as fast as possible.
Avalanche doesn’t work for me because my highest interest rate loan offers me a tax discount come April and my lowest interest rate loan is effecting my credit score so I want it eliminated ASAP.
Every debt repayment strategy needs to be personal and while both of these methods make sense in their own ways I need to look at my situation and realize that neither is exactly appropriate and guess what experts? I’m Ok with that. I’m Ok with not listening to your ”expertise” and I’m Ok with doing what is best for my family’s fiances. You should be Ok with challenging experts too.
We tend to get lost in hype over stuff. Again I will reiterate that both of these methods are good and the main goal of debt freedom is priority but it’s important that we don’t forget that they’re not the only ways though. If something someone else is doing doesn’t work for you, don’t do it, it’s just that simple. I’m going against the grain. I’m currently working on paying off one of the loans that offers me an income tax deduction because it’s like a thorn in my side and I want it gone. Then I will likely shift my financial efforts over to the 0% interest loan because it pisses me off. I don’t care that it’s 0% and I have 5.5% interest loans as well.
I’m paying off our debts according to how much the annoy me, not what the experts say. How are you working on your goals? Any other rebels out there?