My husband DJ and I know how it feels to be consumed with debt.

But we also know there is a way out. 

After having racked up nearly $20,000 dollars in credit card debt back in 2017, we were able to pay it off in 6 months. However, due to several critical mistakes and unforeseen circumstances, we racked up another nearly $40,000 in credit card debt over the course of a few months later

When we paid off our first $20,000 in credit card debt, we did it with no particular rhyme or reason as to the method of how we paid it all off. We simply chucked as much money as possible toward both of our credit cards until the balances were paid off. 

Now, as we’ve been paying off the combined $40,000 balance between three credit cards, we’ve been using the Debt Avalanche approach. At the time of this writing, we’ve been able to pay down nearly $20,000. 

The two most common approaches to paying off debt are the Debt Avalanche and the Debt Snowball. 

Each have their pros and cons, and each will work for different people under different circumstances. 

Let’s begin with the Debt Avalanche – 

The Debt Avalanche method entails making the minimum payments on all your debt, then using any remaining money to pay off the debt with the highest interest rate. This method works well by saving you money in interest payments. 

Here’s an example:

Let’s say you currently have three accounts in debt and an extra $2,000 each month to pay towards your debt. 

  • $5,000 credit card 
    • 18.99% interest 
    • $150 minimum payment 
  • $3,500 personal loan  
    • 3% interest 
    • $50 minimum payment 
  • $20,000 student loan 
    • 7% interest
    • $300 minimum payment 

If you wanted to start off by using the Debt Avalanche approach, you would pay the minimums on all debt (equaling $500/month), then use the remaining $1,500 to pay towards the credit card. 

Once you have paid off your credit card in approximately 3 months, then you would move on to the debt with the next highest interest rate, the $20,000 student loan at 7%. 

You’d continue to pay the minimums for both the personal loan ($50/month) and the student loan ($300/month). However, since you paid off your credit card, you no longer have the $150 minimum payment, which would allow you to add it to the extra $2,000 per month you have to pay off debt. 

The math gets kinda complicated here, but I’ll try to keep it simple. 

Once the balance with the highest interest rate has been paid off, move to the next highest interest rate – in this case the 7% student loan of $20,000. 

You now have $2,150 dollars to contribute to debt each month ever since you paid off your credit card and no longer have a minimum payment. 

What you’d do next is to pay the minimums for both the personal loan ($50/month) and the student loan ($300/month), then subtract that total ($350) from the overall extra money you have to pay toward debt each month ($2,150). 

So in other words, it looks like this: 

$2,150      ($2,000 + Previous $150 minimum CC payment) 

      –       350      (Personal Loan and Student Loan Minimums Combined) 

         $1,800

That is how much you’d have left to place towards your highest interest rate debt – the student loan of 7% interest. In the end, you’d be paying the minimum ($300) plus the extra money ($1,800) towards your student loan each month, meaning a total of $2,100 per month. 

In approximately 10 months, your student loan would be paid off! 

Last but not least, you’d be left with the lowest interest rate debt – your $3,500 personal loan. Since you would have been paying the minimums all along, by this point you’ve paid off approximately $650 (13 months x $50 minimum = $650)

Now you have the extra $150 from the credit card minimum and the $300 from the student loan minimum payment. Add that to the original $2000 you’ve dedicated towards paying off debt each month, and that means you have $2,450 that can go towards your personal loan. 

Since you already paid down $650 dollars, you’d be done with the personal loan in a little over a month after paying off your credit card and student loan. 

In total, it would take you approximately 14 months to pay off your total debt of $28,500. You’d save on interest by paying off the highest interest rate first, the credit card of 18.99%. 

Financially, this IS the most effective and affordable method to saving money on interest while paying off debt. However, psychologically, this method can be much more challenging than the Debt Snowball. 

You’ll see why in a second. 

Now, let’s talk about the Debt Snowball Method 

With the debt snowball method, you pay off debt in order of smallest balance to largest, regardless of interest rate. You continue to pay your minimums on all your debt, except your smallest one – and attack it with a vengeance. 

When the smallest debt is paid, you move on to the next smallest and repeat until you plow through all your debt.

The nice thing about the debt snowball method is that it forces you to be intentional about paying off one bill at a time until you’re debt free. You will begin to see instant progress and will be able to pay off all your debt quickly. 

Let’s use the scenario from above to show how it would work with the Debt Snowball

Let’s say you currently have three accounts in debt and an extra $2,000 each month to pay towards your debt. 

  • $5,000 credit card 
    • 18.99% interest 
    • $150 minimum payment 
  • $3,500 personal loan  
    • 3% interest 
    • $50 minimum payment 
  • $20,000 student loan 
    • 7% interest
    • $300 minimum payment 

With the debt snowball approach, you will attack the smallest balance first – in this case, the $3,500 personal loan.

You begin by paying the minimums on all debts – $150 CC + $50 personal loan + $300 student loan = $500. This leaves you with $1,500 extra to pay towards your personal loan. 

As soon as you pay off your personal loan in a little over 2 months, you move on to the next smallest balance, the $5,000 credit card. Since you no longer have the $50 minimum payment from the personal loan, you are able to add that to the $2,000 extra you have each month to pay off debt! 

You continue to pay the minimums on your credit card and student loan, but now you’re able to use all the remaining money to put towards your credit card. In just a few months, your credit card balance is paid off! 

Last but not least, you have the $20,000 student loan. At this point, you have gained momentum and motivation to pay off your last debt. Before you know it, your student loan is paid off! 

So, what’s the best method for you and your significant other? 

With the Debt Snowball approach, the idea is that having small wins early on gives you motivation to continue paying off your debt. The problem is, the Debt Snowball method may be more expensive in the long run, since it does not prioritize the amount of interest paid. 

However, with the Debt Avalanche, it can be easy to lose steam and give up long before you even pay off your first debt!  if you lose motivation to pay off your debt due to not seeing any quick wins, you may still end up paying hundreds if not thousands of dollars of interest due to not paying off your debt in the end. 

Ultimately, it all depends on what you are able to be consistent with and committed to. 

If you are serious about tackling your debt, pick the method that is best for your own situation and personality. 

Remember, there are two people making this decision. Make sure to spend time communicating on which method is best for both of you. 

The best method is the one in which you will follow through!