Most people know they should pay off debt but don't have a clear picture of what that actually looks like month to month. The interest adds up faster than expected, and without a plan it's easy to feel like you're making payments without making progress.
The two most common strategies are the avalanche and the snowball. The avalanche method targets your highest interest debt first and saves the most money mathematically. The snowball method pays off your smallest balance first and builds momentum that keeps people motivated. Neither is wrong. The best method is the one you'll actually stick to.
Common Questions
What is the debt avalanche method?
You put any extra money toward the debt with the highest interest rate while making minimum payments on everything else. Once that's paid off you roll that payment into the next highest rate debt. It minimizes the total interest you pay over time.
What is the debt snowball method?
You target your smallest balance first regardless of interest rate. Paying off a debt completely gives you a psychological win that keeps you motivated to keep going. Once it's gone you roll that payment into the next smallest balance.
Which method saves more money?
The avalanche almost always saves more in total interest. But research shows the snowball method leads to higher payoff rates because the early wins keep people engaged. The right answer depends on whether you're more motivated by math or momentum.
Should I pay off debt or invest?
Generally, if your debt interest rate is higher than what you'd earn investing, typically 7-10% for index funds, pay off the debt first. High interest debt like credit cards almost always gets paid off before investing. Lower rate debt like student loans or a mortgage is more of a judgment call.