Debt snowball? Smother your bills with a debt avalanche

re: Debt snowball? Smother your bills with a debt avalanche

Another College Graduate — Fri, 23 Oct 2009 21:22:41 GMT

What if your highest debt is a 9.9% mortgage - is not the tax benefit better than the interest savings? I will continue to pay off my auto loan at 8.6% - but thanks for the advice anyways!

re: Debt snowball? Smother your bills with a debt avalanche

Vicky — Sun, 19 Jul 2009 23:18:24 GMT

I am working on the Debt Snowball plan and have found it works well for me and my family. We started in May with $55k in debt (not including the home mortgage). Since then, we have a budget and I have paid off my son's braces ($2,250 since May) - 18 months ahead of the orthodontist's minimum payment plan. In under 10 years, we will be completely debt free, including the mortgage, and will have a 6-month emergency savings, fully-funded college for my son, and a retirement fund fully under way. Way to go Dave Ramsey for your ministry! We are living like no one else so some day we will live like no one else.

re: Debt snowball? Smother your bills with a debt avalanche

Richard L. Bergerson — Mon, 01 Jun 2009 16:02:33 GMT

Different strokes for different folks! Love the frigging idea of paying off little debts with max payment per dollar owed. And, love deleting bucks on high interest debt.

But you have to figure out who and what you are, what you want, what encourages you. Grossly exaggerated example: say you got 10 accounts totalling $5,000 and one at $10,000. WHAT IS RIGHT FOR YOU? Get rid of the littles one at a time so you can pay off one more in the next months.? Pay off the highest interest rate, even though doesn't majorly affect monthly payments due? Whatever YOU chose is going to be mo' betta' than my choice, just pay it off. Go for the rewards that best tickle your fancy (and our fancies love to be tickled) , just pay it off, and slow down spending.

"Rich" ain't earning more than you spend, "rich" is spending less than you earn.

re: Debt snowball? Smother your bills with a debt avalanche

Meg — Fri, 18 Jul 2008 06:40:36 GMT

My husband and I track our finances and review everything weekly in a spreadsheet. Me make minimum payments on everything and put the rest towards the highest interest debt. We also transfer balances to help with the interest rates when it makes financial sense.

We don't look much at how many debts we have, we look at how much we have total. For us, the avalanche method makes a lot of sense because or total debt goes down faster -- and that's the number we care about. So, if you're having problems with the avalanche method, try totaling up all your debt and tracking it somewhere (if you haven't already -- hey, it doesn't have to work for everyone).

re: Debt snowball? Smother your bills with a debt avalanche

Melissa — Thu, 17 Jul 2008 21:05:20 GMT

I'm sorry given human nature I have to agree with the Debt Snowball. I read Dave Ramsay's book and have begun his baby steps to paying off debt. I feel much better psychogically and more satisfied when I see that zero balance in the books. Sorry I understand the logic but if I were completely logical in the first place I wouldn't have gotten myself into debt. Step 1 admit the problem. I have and the debt snowball works better.

re: Debt snowball? Smother your bills with a debt avalanche

Kitty — Thu, 17 Jul 2008 20:58:44 GMT

The avalanche is just one method to pay off debt.

The debt snowball ala Dave Ramsey is ONE step in learning financial discipline.

What works for and motivates one person may be different than what works for and motivates someone else.

Money, finances and debt are inextricably linked to human psychology (something politicians know and use to--successfully-- get votes)

The only "right" method to paying off debt is the one that results in debt elimination.

Rather than argue over the "correctness" of each method, why not congratulate those who do successfully pay down their debt regardless of the method used? THAT is an accomplishment in itself.

re: Debt snowball? Smother your bills with a debt avalanche

livesimpleinvegas — Thu, 17 Jul 2008 20:51:34 GMT

I think it's ironic that many financial advisers are quick to point out that incurring credit card debt at 15% is ridiculous if you have savings sitting at 2%, but it's wise to pay off a $95 card at 5% when you may have a $2000 card at 25% because of the "psychological benefit." Following the psychological benefit of retail therapy is often what got people into the debt mess, so I don't see any real change in pattern by neglecting financial common sense to do what feels best.

I get that there is a motivational necessity, so how about after they snowball the first card away and know it's possible to pay them off, the debt avalanche is paid. Explain to them that only paying off their small balances regardless of interest rate is throwing money away and they could be debt free months sooner if they go by highest interest rate instead of lowest balance. After the high of paying off the first card, the thought of being out of debt several months sooner could be the motivator to a real "psychological benefit."

re: Debt snowball? Smother your bills with a debt avalanche

The Geared Investor — Thu, 17 Jul 2008 20:40:31 GMT

I'm not sure this has to be considered some sort of novel program, paying off higher interest rates first just makes sense. Or you can try to take the money you would use to pay off your credit cards and invest it to try to make a higher percent on your investment than your credit card is charging. ...Um, bad idea. I talk about this in an article where I have some very smart but really dumb friends doing this. See the details:

www.thegearedinvestor.com/pay_off_debt.shtml

re: Debt snowball? Smother your bills with a debt avalanche

Amanda — Thu, 17 Jul 2008 20:35:30 GMT

I agree with Flexo. Instant gratification and credit card payments should not be put in the same group. Instant gratification is what got most people into their financial mess in the first place, and it will not retrain you to spend more wisely!

re: Debt snowball? Smother your bills with a debt avalanche

Jim — Thu, 17 Jul 2008 16:32:07 GMT

I am a fan of the debt snowball program. The Avalanche in theory also works but for the majority of people, the Debt snowball is the bast plan to really payoff their debt with satisfaction. The difference in interest paid between the two is insignificant if a person is really focussed on paying off their debt in most cases. I am a debt counselor in MO so this is what I experience with my clients.