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Which Debt Management Plan Should You Use?

Which Debt Management Plan Should You Use?

It doesn’t matter what kind of debt is weighing you down — you need to get out from underneath it. Paying down debt is more attainable than you might believe, especially if you follow a tried-and-true method from a financial guru.

There are two competing debt management plans worth considering: the debt snowball and the debt avalanche. Here is a description of both, with pros and cons so you can decide which will better help you become debt-free and obtain the lifestyle of your dreams:


The debt snowball became popular thanks to personal finance guru Dave Ramsey, who strongly advocates for this method of overcoming debt. As the name suggests, the strategy entails starting with smaller payments and growing your repayment over time, which makes it easier to get out of debt as time progresses. Plus, as Ramsey explains, the snowball method feels more rewarding from the get-go because it allows for small successes that provide a sense of satisfaction.

The snowball method entails paying the minimum on all your debt accounts except the account with the smallest balance, which you will “attack” with as much extra money as you can squeeze out of your budget. You should be able to eliminate this debt rather quickly, and when you do, you should close the account. Then, you begin using all your extra money to repay the second-smallest balance until that balance has been reduced to zero. Then, you move onto the account with the third-smallest balance, and so on. As you progress, you can add the minimum payment of the previous, closed accounts to your new target debt, increasing your payments and making larger balances easier to pay off.

Dave Ramsey admits that the debt snowball isn’t usually the most efficient debt repayment plan, meaning you might not repay your debt as quickly or with less money than the debt avalanche or other debt repayment strategies. However, most people find the snowball method the most fulfilling, which keeps them paying down their debt and eventually gets them debt-free. After all, the best debt repayment plan is the one you can follow to completion.


The debt avalanche, also known as debt stacking, is a method of paying down debt that prioritizes helping you better understand your debts while reducing your expenses as much as possible. The primary concern of the avalanche method is compound interest, which tends to increase the size of debts and ensure that minimum payments will never repay the balance in full.

Unlike the snowball method, which organizes debts from smallest balance to largest balance, the avalanche method puts debts in order of interest rate, with the debt with the largest interest rate repaid first and the debt with the smallest interest rate repaid last. This helps to thwart the growth of debts while you strive to repay them. Like the snowball method, you will make the minimum payment on all your debts to prevent late fees and other issues, but you will throw all your extra money at the balance with the largest interest rate — which tends to be a credit card account.

The upside of the debt avalanche is that you likely won’t be wasting money by accruing more interest than necessary to pay down your debt. The downside is that the first debt you are trying to tackle might be quite daunting in size and scope, and it might take longer to overcome that debt than it would to clear your first debt with the debt snowball.

Regardless of Which Method You Choose…

Ultimately, it doesn’t matter which debt repayment strategy you employ, as long as you are doing something to manage and eliminate oppressive debt. Regardless of which method you choose, you will always need to take the following actions to make your repayment strategy feasible:

Use account tracking tools. To start, it will be useful to have personal finance software that connects directly to your financial accounts and tracks your incoming and outgoing money. This will give you a better picture of your financial situation, so you can understand your assets and your debts.

Make a budget. By breaking down your expenses, you can build a budget to control your spending. By maintaining a budget, you can be certain of what money you need to use to live and what money you can devote to paying down your debt.

Live frugally. Life won’t be easy while you are repaying your debts. You might have to downsize your lifestyle, eating more frugal meals and avoiding luxuries like new clothes or tech gadgets. However, once your debts are gone, you will have more money at your fingertips than ever before.

Paying down debt is hard, but it will likely be one of the most empowering acts in your lifetime. Overcoming serious debt is a significant milestone that puts you on the path to financial freedom and wealth. 


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