Debt Snowball vs. Debt Avalanche: Which Debt Payoff Method Is Best for You? | 632

Okay, question number one.

"If I choose the avalanche or snowball method for paying off my credit cards, do I still pay the minimums on the other ones?"

Yes.

Okay.

[laughs] Let's see.

We're gonna go into some more detail, right?

Yeah.

So listen, let's unpack the three different types of debt payment methods.

So the snowball method is to pay off the debt with the smallest balance, the avalanche method is to pay off the debt with the highest interest rate first, and the minimum payment method is to pay off your debt with the highest minimum payment first, and which is, we try to exclude your mortgage from that.

If you're paying on your mortgage, we're not really counting that one.

We're counting everything else.

Which, by the way, in our budget system, those are the three columns that we have in there-

Mm-hmm

...

so that you can really look at this and determine it.

And, but either way, you're going to a- only and specifically pay the minimums on everything-

Mm-hmm

... and then you're gonna choose the one that you're tackling to put all of your extra money toward.

Yeah.

Yeah, so it really doesn't matter what method you choose in whatever season of life you're in.

So Shana and I, we make that decision with our clients based on what they have going on, right?

Mm-hmm.

So we have, we may have one client that has a $5,000 balance on a credit card, and we have somebody who has a $5,000 balance on a car, but the interest is so different and the payments are so different that it makes sense to tackle one versus the other.

Not necessarily based on just the snowball method, which is probably the most, quote unquote, "popular," but it really depends on your situation.

Yeah.