I often get asked what is the best way to pay down your debt. Here’s the spoiler: the method that actually works for you is the best way to slay that debt. Personally, I am a weirdo who loves numbers and gets totally motivated by the math behind building wealth and ditching debt. Even though I’ve never carried debt before, I will be marrying into student loan debt later this year when Peach and I finally tie the knot. Naturally, we’ve discussed how to handle paying off his student loans many times over the years and our plan of attack has evolved as our jobs changed and incomes increased. But one thing remained consistent: we wanted to knock out his higher interest rate student loans first (aka debt avalanche).
Currently, Peach has been putting the extra money he earns from coaching and grading state tests (he’s a teacher) towards his student loan with the highest interest rate. Once we’re married, we’ll be using some of my income to also ditch that debt quickly. While it does certainly take a bit longer to see movement when you’re paying down higher interest rate debt, we’re both able to feel motivated about the idea of saving more in the long-run. However, I recognize this as pretty unusual. Generally, those small wins in the beginning of your debt repayment journey can really help motivate you to keep going. This is why debt snowball is often the superior method for most folks.
But you should choose for yourself! Learn more about how to snowball or avalanche your debt in this week’s installment of The 3-Minute Guide.
I’m a big fan of the avalanche method, as I hate the feeling that I’m wasting even more money on interest payments. That said, I do completely understand the psychological aspect of using the snowball method to eliminate debts. I used a combination of the two when paying off my student loans.
I think the most important point in this post is that the best way to attack debt is to use a strategy that you’ll actually stick to.
Mathematically, the best way to eliminate debt is to pay down the debt that has the highest interest rate. But some people will quit if they don’t see that number moving much the first few months.
Thanks for saying it’s okay to use the strategy that will provide consistency. I’m sure this will make a huge difference for those looking to pay off debt.
I actually started with the snowball method when I had a bunch of little debts, but once those were knocked out I switched to the avalanche as well! The snowball worked because it motivated me, but the avalanche method saved me the most money in interest! I agree that you should pay off debt in the way that makes the most sense for you.
I to think its important to use the method that you are confortable with if you are going to stay with your program for any sustain amount of time to get your debts paid down and become debt free as a result of your efforts. As time has proven time and again its more that one way to do anything, so just get it done. The sooner you begin the quicker you will finish. So, get organized by lining your bills up from smallest to largest and start.
I’m definitely a debt snowball candidate.I usually prioritize smallest debt first and try to get them eliminated. These small victories some how inspire me to save more.
I think they key paying back the debt and manage your finances in the healthiest way is to stick to a strategy that you are comfortable with. I immediately started a passive source of income after graduating to pay off my debts and I stuck to it till the time my entire debt was paid off. It works if you stick with it. Thanks.