Debt Repayment Strategy-How I Plan to Reach Zero Debt

It’s time to dive into our debt!

There are a few different ways to go about debt repayment.  Each has their pros and cons.

The Methods

There are 2 main methods to paying off debt:

  1. Snowball method
  2. Avalanche method

The snowball method is paying off the smallest debt and building up to the largest.  You pay the minimum on all your debts, and then use any leftover money to pay the smallest debt.  One the smallest is paid off, you pay all your minimums and use leftover money for your second smallest debt.  So on and so forth until you’re debt it completely paid off.

The pros to this method are psychological.  Paying off a few small debts fast can keep you motivated to continue paying the rest until they’re all paid.  By the time you reach your largest debt you’ll be allocating much more money towards is because your cash isn’t strapped down by all those other debts (that you just paid off)!

The cons are financial.  Your higher interest debt keeps accumulating interest.

My husband has an Amazon store card and I have an old credit card, the balances were $800 and $600, respectively.  To get the (snow)ball rolling (haha), I paid those 2 cards off completely earlier this month to gain some debt crushing momentum.  My decision to do that was solely based on the balance and nothing else.

The avalanche method is paying off the most expensive debt first.  This is determined by interest rate.  The approach here is to pay the minimums on all your debt and use any leftover money towards the debt with the highest interest rate.

The pros are financial.  You save money by paying off the highest interest debt first.

The cons are that it can take a while and you might lose your debt crushing momentum.

Which is better?

That’s completely up to you!  Will small victories encourage you to stay at war with debt?  Or are you looking to skip those and go straight into the large battle? Kellog researchers found that the snowball approach was more successful long term because it kept people motivated.

What am I doing?

Since I know the pros and cons of each method, I am doing a combo approach.  I am going to (probably falsely) assume that I am the first to try this approach. I’ll call it the SNOWLANCHE method.

Like I mentioned above, I paid off those 2 credit cards.  I needed to see some $0 balances to gain momentum.  Next, I’ll attack the debts that are 0% interest (intro periods/promotions).  Finally, I’ll go after the debt with the highest interest rate and work my way down.  Why, you ask?

The 0% interest cards are for promotion periods.  Once the promo period is over, the interest rates will be my highest.  To avoid that, I want to pay them off before the promo period ends.

Here is a quick glance at my plan:


*I found this awesome spreadsheet while browsing this CashCowCouple post.  

What method worked/is working for you?  What debt do you find the most stressful?  Do you have questions or suggestions on my approach?  Comment below!

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