Bolinske Law | The Snowball VS The Avalanche Method: Which One Is For You?
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The Snowball VS The Avalanche Method: Which One Is For You?

The Snowball VS The Avalanche Method: Which One Is For You?

When trying to tackle your debt you’ll come across many different methods, tips, and tricks that promise to help you get it done faster. While they all depend on your personal finance situation some have the potential to help you when it comes to getting the job done.

The “Snowball” and “Avalanche” methods of debt repayment have been around for a while. Both methods offer a way to help you pay off your debt sooner.

Most people are interested in them because they make big promises in helping you finally get a hold on your debt without having to consolidate or file for bankruptcy. This is a great characteristic of them because the idea of consolidation and bankruptcy scares most people.

Here’s a little about each to help you decide which method would be right for you.

What The “Snowball” Method Does Differently

Dave Ramsey first introduced the Snowball effect. It works by listing all your debts in order of lowest amount owed to highest amount owed. You then review your current financial situation and see how much of your monthly income, after all your bills are paid, you have left over to devote to a steady debt repayment plan.

You then take that amount and add it on to the bill with the lowest amount owed while continuing to pay the minimum on all other debts you have. Once the first bill is completely paid off you take your debt repayment amount, coupled with the minimum payment you were already paying on the first bill, and move it to the bill with the next lowest amount owed.

This way you would now be paying the first bills minimum payment + the amount you allocated to repay your debt + the new minimum payment of the next bill. This formula continues until your debt is gone.

The “Snowball” effect is great because it doesn’t ask for much more than you were already required to spend on your debt in the first place. It also allows you to feel like you are paying off your bills quicker by tackling the smaller balances first. It gives you a sense of accomplishment with each little victory you achieve.

What The “Avalanche” Method Does Differently

The “Avalanche” method is like the “Snowball” method except it works by getting rid of the debt with the highest interest rate first. Using the “Avalanche” method you save more money in the long run by cutting down on how much interest you’re charged for each bill.

However, some people don’t care for this method because it doesn’t give them the sense of accomplishment the little victories from the “Snowball” method does.

If you are the type of person that can see the benefit of getting rid of high interest rates cards in favor of lower interest rates then the “Avalanche” method is for you.

Why These Methods Are Popular

When you’re trying to pay off your debt it can be overwhelming. People start to wonder if it is even possible. By developing these methods it gives people a plan to pay off their debt where they might not have had one before.

It gives them hope when they reach a milestone, such as a paid off balance, that it is possible to pay off their debt on their own.

How To Choose

If you are curious which method is for you it all comes down to personal motivation. Are you the type of person that can see yourself getting excited when you pay off each bill? Do you think it would help motivate you to push harder and keep going? If so, the “Snowball” method is for you.

Are you the type of person who can see the benefit of paying off the high interest rate balances to save more money in the long run? While it may take a little longer between each payoff you can still see the benefit of focusing on the interest rates and won’t get discouraged. If so, then the “Avalanche” method is for you.

How To Make It Work

People also tend to wonder how they can make this work for them when everything else they’ve tried has failed. It’s all about preparation, determination, and the willingness to put the effort in. When you set yourself up to succeed you’re going to do just that.

If you go into whichever method you choose with a positive attitude and the willingness to get your debt paid off you won’t have a problem. By creating a plan and sticking to it you’re more likely to be successful.

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