Debt Snowball vs Avalanche: How to Choose the Right Debt Payoff Plan (and Stop Winging It) | 96

0:00 I mean, how much debt? OK, so once people finally see their debt numbers, one of two things happens. They either panic or they freeze because Google says one thing, TikTok says another. And your cousin Laura also has an opinion about what you're supposed to do to pay off your debt, right? So today we're going to be breaking down the three most common debt payoff paths and who they actually work for because chaos is not a strategy. And I am going to a breakdown the three ways today so that you can have some clarity about what to do next.

0:34 Hey there. I'm Jules the budget nerd and welcome to the Debt Rebel show. This is the place where working families yours. Learn how to stop living paycheck to paycheck, crush debt for good, and build a life where money actually works for your family. In about 15 minutes, I'll share practical family budgeting tips, tough love strategies, and actionable steps to move. Toward debt free living without. The fluff, the shame, or the confusion. And I know a thing or two about this. My family and I have eliminated over $107,000 in consumer debt and that was after I got my degree in.

1:09 Economics. So stay. Tuned this is going to be a great. Episode so grab that coffee your. Planner, whatever you need to make this a great experience. Maybe a snack if you're like me. And let's make your money work for your family. Because now that you have your numbers based on this list, based on the last episode, you know how much that you're in. So what are we going to do next, right? We're going to pick a plan and stick with it. All right, First off, now you know how much debt you have, it can feel super overwhelming.

1:38 And when I actually sat down and put all of my numbers out there, it just felt like, my gosh, not only overwhelming, but emotionally draining. And I just, you want to talk about a shame spiral that I went into because if you've been, because I, I knew better. I was taught to be quote UN quote responsible with debt and then got my degree in economics. And then my husband and I had the numbers that I, that I was dealing with was $107,000. And it just was a lot. And it felt like I felt like we were in quicksand too, because we needed to get out of it as fast as we possibly could.

2:21 But I'm going to talk today about one method that we use, another one that we considered, and then one that I don't encourage. So today, the thing that I want you to take away is that there are options. And then the one that I chose and the one that I teach is the one I encourage because it has helped our family eliminate that debt. And then I'm going to tell you something that I wish I had done differently too. So one thing that is important when you're evaluating the best payoff option for yourself is remember that your motivation is going to fade if you don't have a plan.

2:58 So picking a plan and then realizing that most families quit because they choose a plan that doesn't fit real life. And so when we talk about these options without, I don't want to pretend that every single one of us has the same brain, the same income, and the same energy. And you know what? We all have different motivations too for why debt is something that we don't want to have in our lives anymore. I just want to acknowledge that and the three ways that you can choose to eliminate your debt or the debt snowball, the avalanche and my least favorite, the wing it method.

3:39 So what is the debt snowball? So it is listing your debts by balance from smallest to largest. Now, the good thing about that is this is where you can build some momentum and some quick wins. This was the option that our family chose because I needed something looking at that big hundred $107,000 chunk. I needed something that was going to give us some encouragement to keep going. Now those are the good things about it. The bad thing about it is it isn't mathematically the fastest. So but one thing I realized in evaluating that whole process is if it was about the math, I wouldn't, we wouldn't have been in that situation, right?

4:22 Because I knew I knew what the math was and it wasn't in our favor because we were fighting interest rates and all of these things. And so that is the downside to the debt snowball is that it's not going to be the fastest when it comes to, you know, the math, but it's great for people that have ADHD or people that are just need that those those wins. Maybe you're a burnt out parent and you're just like, I need something to help me get out, get this out of my life. And then anyone that needs encouragement to stay consistent.

4:57 And so for all of those reasons, that's why we picked that method. And that's what I teach inside the Alliance coaching membership because it was what we used and it has, I have seen it work for numerous clients. So the next one is the avalanche. Now this is putting your debts in order of highest interest rate first. So the good thing about this is it saves money in the long term. So you're not going to be paying as much interest. The bad thing is that progress can feel a little bit slow because you're not going to get those quick wins like you would with the debt snowball.

5:33 And it's best if you have high interest balances that you're trying to pay down. It's going to be best for those and people who stay motivated by logic and not emotion. So if that's you, maybe the debt avalanche is the best method for you. And I do talk a little bit more about interest rates and stuff within a debt snowball, ways that you can make your debt smaller by addressing interest rates with your creditors. And the third way, which is the wing it method, it's also where most people stay stuck in their desires to get debt in their desires to eliminate debt.

6:12 This method is not the one that I encourage because it it's doesn't allow for the kind of momentum, the kind of wins that you could with the other other methods. But that is paying the minimum, paying minimums on everything and then moving money around. It's just kind of like, have you ever gone to one of the baseball games and they put on the big Jumbotron? You're like OK, follow this and. So like you're. Following, that's what it's like you're just moving money around trying to figure out OK, or it's like playing whack A mole at Chuck E Cheese and you're just like, my gosh, it's just creating a lot of you're expending a lot of mental energy because you're moving money around trying to figure out is this going to clear is it's not going to clear that kind of stuff.

6:58 So also hoping that bonuses or tax refunds will come in and swoop in and save the day. And so that's that wing it method. And so I don't encourage that, but I know that there's a lot of people that are in that spot. So if that's you and you're like, hey, you know what, I need something different, then let's let's figure this out. So one thing to keep in mind that whichever plan you choose, if it depends on your future motivation, it's not necessarily a plan that's going to be successful because motivation fades.

7:29 And so we need a system that's going to work for you. So why do most people pick the wrong method? So we can pick the wrong method because we are making our decision based on math and not our past behaviors. We underestimate the stress of just life, work, parenting, all of those things. We underestimate that we don't have accountability. And that's why accountability is a huge one inside the membership. And we try to do everything at one time. And so we want to do First things first. The best plan is the one that you will follow when life life's real hard.

8:09 And so I have seen clients that have gone through some of the most unexpected life circumstances and I've been able to stick with the plan because it's not about motivation. It's about following a plan and doing the next step, next. So, So why do plans fail? So we want consistency. We don't want perfection because when, like I said, when life hits you, you want to be able to stay consistent and not have to fall back on that motivation because motivation fades. But this system will not. So plans fail without having check insurance, without adjusting for life circumstances or new things that come up.

8:51 They also fail when there's not support. So doing this alone, which I talked about the beginning, that's the thing that I wish we would have changed about ours. Our debt elimination story was my husband and I. We were just white knuckling it ourselves. And so we didn't have outside help to carry us through those times where the motivation lacked and the times where we didn't necessarily know what the next step of the plan was. And so we were just figuring it out and we were Googling it and we were just like praying about it and just saying just tell us the answer.

9:25 And so that's the thing within the the community that we've created in the Debt Rebel. And that's why having some support and some accountability is so helpful is to carry you through those things. Because I didn't fail because I was bad with money. I failed because we were doing it alone. So what do you do next? So there's three options for eliminating your debt. The debt snowball, the debt avalanche or the wing it method, right? So you can decide which one of those you want to try and then what do you do next?

9:59 SO3 paths forward are the do it yourself. So pick that method, set those reminders. And then one thing I do want to remind you is that progress might be a little bit slower, but you can do it yourself. The second one is get some short term clarity. So I'm hosting a 15 minute free workshop, 15 minutes to money clarity. And you can get that and you can register for that on my website, jewelsthebudgetnerd.com/workshop. That's JEWLZ the budget nerd.com/workshop. And I'm going to walk you through 15 minutes live on how to get clarity about your money and what you and how to take those next steps.

10:39 And that will help you choose which plans best for your life. So if you're like, OK, this is great, but I don't necessarily know which plan is best for me. We're going to talk about that in that workshop. And then the third path forward is getting ongoing support. So get commuted of other parents that are eliminating their debt and getting their financial goal or getting their financial house in order. You get coaching, you get accountability and adjustments as life happens. So this isn't about creating pressure for yourself.

11:09 This is about creating the next step forward and what's best for you and your family. So if you want to stop second guessing yourself and stop fingering and like going, Oh my gosh, I know I need to make a plan, but you don't know which plan to choose, I highly encourage you to join me inside that workshop and we'll take that next step together. So remember, you don't need a perfect plan. You need the right plan and you need support. And it's not about and support isn't a weakness. It is there's a shortcut to getting to your debt free day faster.

11:40 So clarity will show you the path, but support will help you walk it out. And I am excited to be a part of that with you. Thank you for tuning into the Debt Rebel show today. Ready to take your family budgeting to the next level? Stop that paycheck to paycheck grind and start living debt free. Head over to my website debtrebelpodcast.com that's. DEBTREDE. Lpodcast.com to grab resources, tools, and tips to make it happen. And don't forget, subscribe. Leave a review and if you know another family that will love hearing today's episode.

12:18 It. Would be such a gift for both of us. Your friend and me if. You share this episode. And remember your debt. Free life starts with one brave step, and I'm cheering you on every step of the way. We'll talk soon. Debt Rebel.