How to Pay off Debt (Debt Snowball vs. Debt Avalanche)

Tiana Clewis: Hey Dreamers and welcome back to my channel where we break down all things money so it can stop being an obstacle and start being what it is: a tool to help you build a life that you truly find worth living.

Now, today, I've figured in our time together we would talk about getting ready for the future. Look, the coronavirus pandemic, it's happening. It's probably not going to stop anytime soon, but our government is moving forward and they are opening things up all over the place.

I live in Texas. Things in Texas have opened up. Now the Clewis clan has not changed their behavior at all. We're still basically sheltering in place simply because I have asthma. There's multiple members of my family that has asthma, so we're not going out more than we absolutely have to.

But many of you are in a position where you do have to go out more often. You do need to make... work. You do need to make money, and it's really time to start thinking about, "okay, what are we going to do in the longterm?" because we can't stay in a holding pattern longterm.

You still have debt to pay off. You still have things that you need to deal with right. So what I'm going to do over the next few weeks is we're going to really start talking about putting ourselves in position, mapping out, planning out what we're going to do in order to get ourselves into a better position.

One of the things that many of us need to be doing to get in a better position is to pay off the debt. Debt, it's got to go. We got to get rid these car loans. We got to get rid of student loans. We've got to get rid of these payday loans. Credit cards. We... like, we need to start getting rid of this stuff.

You've seen it, especially if you're one of the people who maybe got laid off from your full time job or maybe you had a cut and hours, a cut and pay. Somehow your income was impacted and you started to really feel the weight of the debt on you. Well, now is the time for you to start mapping out how you're going to pay off your debt.

But I also promised in the past that I was going to do a comparison between two really popular debt repayment methods. The one that I recommend, which is the debt snowball and a similar one called the debt avalanche.

Typically, you're going to see two different types of people championing the debt snowball versus the debt avalanche. I will typically see people like financial coaches, and I don't mean like the financial coaches that really, they're an investment advisor. No, like the people who are legit financial coaches, those are the people who tend to be more along the lines of the debt snowball.

Then you have the people who tend to be investors. They tend to focus a lot on using debt to your advantage or focusing your money on investing your money. Those people, they consider them... typically consider themselves financial advisors or financial planners. Those are the people that you will typically see recommend that you do the debt avalanche.

And the reason why this is important is because when you start looking at the differences between the two, there's only one key difference between the two methodologies but the reasoning behind why you do that difference is based on psychology and math. So with the debt snowball, it has psychology working for its advantage, and the debt avalanche has math working in its advantage.

Actually... kinda...

You see what I started to do when I decided that I was going to do this comparison between the debt snowball and the debt avalanche, is I literally just proved to myself why the debt snowball is better than the debt avalanche. And that's what we're going to do today.

So today I'm going to sit here and I'm going to break down the difference between the debt snowball and the debt avalanche and why, at the end of the day, the debt snowball ends up being the better methodology, like nine times out of 10.

Now before we start to break down the reasons why I say the debt snowball is better than the debt avalanche, I figure I should let the newbies on the channel know who in the world I am. My name is Tiana B. Clewis and I'm a Financial Lifestyle Coach who has dedicated her life to helping women entrepreneurs, and so many more, escape the nine to five grind and start to use money as a strategic tool to help them do exactly what it is that they want to do with their life.

So whether your dream is to use money to buy a house, to build wealth, to leave a boat ton of cash to your kids when you pass on, or to be able to be the ultimate philanthropist, those are the types of things that I can help you do. It's all about using money as a tool to create the life that you truly find worth living.

Now, if is the type of journey that works for your spirit, that appeals to your psyche, let me know by liking this video and subscribing to my channel. Make sure you hit the bell so you're notified every time I drop new money tips and business strategies every Wednesday and Saturday, because you know, there's a lot of stuff going on, lot of info to share, and you don't want to miss out on any of it.

Okay. So now that you know who I am and how you can continue to get this awesome content. Let's do this. Let's talk about why I say the debt snowball ultimately ends up being better than the debt avalanche even, though technically the pros [debt] avalanche people are right... kind of.

Now, the way that I'm going to be doing this episode is a little bit different from how I normally do it. What I'm doing is I'm actually going to be turning to my computer and showing you guys my computer screen where I have run three different financial scenarios.

So if you're listening to me on the podcast, you really have to tune in, you really have to pay close attention because I'm going to be throwing out a lot of numbers during this particular episode.

Now, if you want to... if you want to be able to see what I'm looking at all my screens so you can look at it with me, all you have to do is look in the description and you'll see the link to the YouTube video, so that you can join us and watch it on the screen. Now if you're already here, all the YouTube channel, thanks. I'm happy you're here because you're going to get to look at my screen and see the scenarios I've created and the screenshots. So either way, there's going to be a lot of numbers being thrown around.

The reason why I'm doing it this way is because those who are the champions of the debt avalanche methodology always talk about the math. Which is fine. I'm cool with that.

But when you start to actually run the numbers, run the scenarios of really common, real life situations for people, you start to realize that the debt avalanche is not as much of an advantage from a stan... a math standpoint as they make it out to be. And I'm going to prove that to you in this particular podcast episode in this video, because there's like psychology behind the debt snowball that I think is more impactful.

Can I be honest? If we were doing math and I say we because Sis... Sis, got in some serious debt. So I say we, because if we had been doing the math, if we had really been paying attention to the math, we wouldn't have gotten in debt in the first place.

What got us in debt was our behavior, our mindset, our thought processes. Not the math. So why would I lean on the math to get me out of debt when the problem was not the math in the first place? The problem was my head. So that's the reason why people like me are big on the debt snowball versus the debt avalanche.

But I realized now that there are some of you who might have no clue what I'm talking about, don't know what the debt snowball is or the debt avalanche. So let's break that down.

The debt snowball and the debt avalanche are both methods of repaying debt that's all about focusing your attention on paying one debt at a time. Many people, when they're trying to pay off their debt, they'll take an extra $50 on that debt and extra a hundred dollars on that debt, an extra $200 on that debt and they throw little pieces at a bunch of different debts at the same time, and they're not making a whole lot of progress.

Instead, what we want to do is we want to take all of that extra money, pool it together in one big bundle, and then we want to throw it at one debt. And then once that debt is gone, we want to take that pool of money plus the minimum payment for that debt, add it to the next debt, and throw it all to that.

So ultimately, the way the system works is that the entire time that you're getting debt-free, you're literally paying the same amount on your debt every single month, the entire time that you're getting debt free. So if you start by paying $2,000 your plan keeps you paying $2,000 during the entire one, two, three year process that you're spending to get debt free.

Now, if you want to add extra money to it, you can, but the whole concept is you take all of your debts, you pay the minimum payments on those debts, and you pick one debt. That's the debt that you focus on, and you throw as much money as you possibly can at it, pay it off, and then move down the list taking those payments with you.

Here's where the two differ. They differ in how you pick the first debt or should I say the order in which you pay the debts off? The debt snowball goes from the smallest debt to the largest debt based on principle balance, how much you actually owe the debt. Avalanche, on the other hand, focuses on the interest rate. What's the biggest interest rate to the smallest interest rates?

Now again, the reason why they're saying you want to do it this way, with the avalanche way, is they're saying the math, you save yourself more an interest payments by paying it off, by getting that highest interest rate first. And yes, technically that does make mathematical sense.

But the thing is there's psychology behind the debt snowball, because the truth is many of us don't just have a whole bunch of giant debts. Most of us have a mix. You have some small debts and some giant debts, and the... and there's two things that you have to think about.

One, most people, their smaller debts actually tend to have a higher interest rate than their bigger debts. So it kind of ends up throwing the argument for the debt avalanche people a little out of the window simply because there's really typically not a big difference in how you end up ordering the debts anyway, because most of the programs, the systems in place that are going to have high interest rates tend to be smaller debts like payday loans and credit cards, things like that.

Something like a student loan or a car note, even like a personal loan, a 401k loan, those tend have a lower interest rate. So they ended up being in the back of the list most of the time anyway. So that already starts to kind of make their argument not as big of a deal, because the smaller debts tend to be the ones with the larger interest rates.

But here's the other thing you have to consider. When you start paying off those smaller debts first, you get through those smaller debts faster because they are smaller and you start to mentally get wins that you wouldn't have gotten otherwise.

Let's say for example, you have a $300 debt versus a $2,000 debt. If you just pay off the $300 debt, you have at that point psychologically won because you have one less debt on your list. You originally had seven debts. Now you're down to six. You just got to win. And your brain registers getting rid of that debt as a win.

Now imagine if you were able to get that paid off in one month versus six months to pay off that $2,000 debt. Which one is more likely to keep you moving? The one where you were able to get that $300 debt paid off quickly or the one that took you six months to get your first debt paid off?

Psychologically, the debt snowball is going to work for you better. And remember, it wasn't the math that got us in trouble, it was the psychology. So it's important that you get those small wins by paying off those small debts first, getting them knocked out instead of potentially waiting an extended period of time to get a couple of debts... to get your first debt paid off because it had a higher interest rate.

So here's what I've done. I have a scenario that is based on the average American household. So the average American household, for example, has $6,200 in credit card debt. And those interest rates can range anywhere from 15% to 19%. Also, the average household has anywhere from like three to five credit cards. So what I've done is I've created a scenario that has a family that has three different credit cards, and those credit cards add up to $6,200.

I've also done research that shows that student loans, the average family has about $32,000 in student loans. It's usually anywhere from 4.5% to 7%. So I've decided to use an interest rate of 5.85%.

The average person who takes out a car note is going to take out, say $20,000 for a used car or $32,000 for a new car. So I'm going to say you got a fancy used car and you took out $26,000 but you're roughly halfway through paying it off, so I'm going to use the scenario of $13,000 for my fake family.

Before we turn to the computers, I want to let you know that what I'm going to be using as the main basis for my scenario analysis is a spreadsheet that I got from an organization called vertex 42. They have this phenomenal... I mean, honestly, they actually have a lot of phenomenal spreadsheets, but I particularly like to use their debt reduction calculator. You can download it from their website for free. I will put the link in the description, but it's designed to show you different scenarios, different strategies that you can use for paying off your debt.

So I absolutely love. This particular debt calculator. I have redone it. I've recreated it. I have verified it over and over and over again.

So now that you know that, let's get to the computer.

Alright, dreamers, it's time for me to get full on nerdy with you. We're going to jump into this debt reduction calculator by Vertex 42 that I just told you about. And before we get started, let me point out the strategies... I promised that would show them to you. So let's look at this.

On the side, you see with this spreadsheet, there are a number of strategies that you can use. So you can use the debt snowball method, the debt avalanche method, which we're talking about. You can also just use the order that you entered them into on the table. You can also create kind of like these custom numbers, so like you can number these in whatever order you want them to, and then it'll, you can either select highest first, lowest first.

So there's a bunch of different ways in which you can do it. But you know me, I'm a fan of the debt snowball method, and that's why we're here. I'm going to prove to you why the debt snowball method is better than the debt avalanche method, or at least why the debt avalanche method is not as impressive as people try to make it out to be. Okay?

So as you can see, I have already popped in here our scenario with, um, the family credit card, the debit store, credit card, that store credit card... I keep saying debit store, even those department store. What can I say? I like people to use debit cards. So department store, um, the store credit card, the family credit card, the student loans, and the car loans.

And as you can see, I kind of tossed them in here in no particular order. So they're not ordered by balance. They're not ordered by payment amount or by interest rate. I just kind of threw them in here.

So I also selected this, um, balance date. So my thought process is we're going to act like we're going to start paying this off on June 1st.

So you can see here that you have the total amount of debt is $51,200 and that the total payments add up to $951.26.

Now remember I said that what we're going to say is you've gone through your budget, you reevaluate your life, and you're able to pay an extra thousand dollars a month. So what I did was the monthly payment that you're going to make towards your debt is going to be $1,951.56 , which is the total minimum payments plus your initial, uh, additional debt snowball of a thousand dollars.

Now, right here, what I decided to do though...wanted to start with the debt avalanche. So there's this really cool drop down right here, and you can pick snowball, avalanche, or one of these other options. So we're going to stick with avalanche first.

Now let's look at this. According to this calculator, it gives you the total number of months it's gonna take you to pay off each debt and all that stuff. So according to this calculator, it says that the total amount of interest that you are going to pay on all these debts is $4,218.42. If you paid off according to this, that's the total amount of interest that you're going to pay on all of these debts.

It also says that you will be debt free on November of 2022. So what is that? That's a little, that's less than two and a half years. That's like 27 months, something like that. So, okay, there we have $4,218.42.

Now remember what they say with the debt snowball, uh, with the debt avalanche, sorry, is that it's going to save you more money than the debt snowball. So let's go ahead, hit the drop down, and we're going to change it to snowball. Now you see, there have been some adjustments to the numbers.

The first thing I want to point out is your debt free date did not change. Your debt free date is still November of 2022. So it didn't actually speed up anything.

The second thing I want you to notice is the total interest paid is $4,219.44. So under the debt snowball, 4,219.44. Under the debt avalanche, 4,218.42. You save a grand total of $1.02 if you use the debt avalanche method over the debt snowball method.

That's it. You save a whole dollar. You don't speed up your process at all, but you save a whole dollar.

So yeah, I don't know about you, but when I look at that number, I'm like, well, that's not all that impressive. And the truth is, if you were going to do the... whether you do the debt avalanche method or the debt snowball method, the accounts that have the highest interest rate also tend to have the smallest balances. So the truth is there's not enough of a financial gain for you to pursue this thousand dollar department store credit card before you knock out this $400 store credit card.

So just knock that thing off your list. Get that psychological win. Have one less debt you have to think about and worry about faster, and then move on to the next debt.

Now you might be wondering, "Hey Tiana, what if I have another? Like what if my life doesn't look like this?" Well, I did two more scenarios based on profiles from actual clients. Of course, I don't have their names on there, but this is based on profiles from actual clients. So let's check out those other two scenarios because this is a consistent trend that I see.

Okay, so here we are with scenario number two. This is a cl... a, um, a profile of a client that I had in the past. And as you can imagine, I've updated the numbers. One, I didn't tell you exactly who was who on the loans. Okay. Just know that they have some car loans, some student loans, some bank credit cards, and a 401k loan.

I also updated the dates so that it's June 1st of 2020 so we're looking at someone who had four different debts. You can see their interest rates range anywhere from 3.25% to 15.05% and their debts range anywhere from $2,400 to $33,000. They had $56,000... $56,484.74 worth of debt. They were paying $679.79.

So what I'm going to do once again is we have a scenario where they're paying an extra thousand dollars a month towards their debt. When you look at the debt avalanche method, you end up with total interest that they're going to pay off $4,194.91. They're going to be debt free in July, 2023 if they started today, which they started a while ago, they are actually kicking butt. They're doing pretty good.

Now, let's change it to the debt snowball method. Alright. So the number changed to $4,315.97 and then that date doesn't change at all. So we have a difference between the debt snowball method and the debt avalanche method. This one is a bigger difference. It's the difference of $121.06.

But mind you, she's going to be debt free in 2023 so over a three year period, it's a difference of a grand total of $121.06. That's it. It's just not a huge difference over three years. So it's not that big a deal.

So we're going to look at this one last scenario, which is another common one that I come across.

Okay, so here we are with the final scenario, scenario three. And this is based off of a client that I had in the past. However, I did make a update to this particular spreadsheet only to add a car loan. And that's simply because even though the scenario I'm seeing with her, she was kind of a shopaholic is normal for most shopaholics that I see. Typically when I meet a shopaholic, they also do have a car loan. It was kind of rare that I come across a shopaholic without a car note.

So I decided to make this closer to what I normally see. I added a car loan to this scenario using an interest rate that I commonly see because if I want to be real about it, a lot of people I work with don't necessarily have bad credit. They just like to shop and they have a lot of debt, but they don't necessarily have bad credit. Okay? Those are two different things.

But so, all right, so you see here, she has six different types of cards. There's one that's from a bank, and the rest of them are from different stores. You see that if you exclude, if you ignore the car loan, the interest rates average anywhere from 22% to 29%.

Um, so if you're in this scenario, well, okay, if I use it at avalanche method, I'm going to pay off this $1,900 bank credit card first. But if I'm using the debt snowball method, I'm gonna pay off this $386 debt first. That is a difference of just under what, that's like $1,550 difference between those two debts. And I'm going to pay the bank card versus the store credit card first? Like come on. That's crazy talk cause I can get that knocked out really easily.

Especially considering this particular individual, she was able to pull together an extra $500 a month. So that $500 we'll knock out that store credit card month one. Otherwise she has to keep paying on that store credit card, and then she's going to spend four months trying to pay off this bank credit card. That's just silly to me.

Why would I keep my list of seven debts at seven for three, four months longer than I have to? Why would you do that?

But Hey, we're here about the math, right? So let's go to the math on the debt avalanche method. You see, I already have that selected. When you slide down here, you see that the total interest that you pay is $1,800... uh, $1,816.47 with a pay off date of February of [2022].

So now let's hit the debt snowball option. Switch it over, and you see that the total interest paid went up. Debt free date didn't change. But total interest paid went up, but it went up by $86. That's it. It went up by a total of $86.

So psychologically my list of debts has to stay an... has to stay at seven debts for an extra month, all to save a grand total of $86 over the course of two years.

And there you have it. Three different scenarios that show that using the debt avalanche method is not going to give you that much of a financial advantage. We saw a difference between the debt avalanche and debt snowball of interest payments of $1. You saw differences of $86 and we saw a difference of $121.

And these are over multiple years, so it's not even like you're seeing that over a single month or over multiple months. You're seeing that over the course of multiple years. Is that really worth it?

Especially when you see that in some of the scenarios, you're going to be trapped waiting what, in... in one case, 10 months to be able to pay off the smallest debt because you have four other debts that you're supposed to pay off before, just because that's how the interest rates fall.

It just doesn't make sense from a psychological standpoint and the quote unquote benefit you get from a mathematic financial standpoint, it just doesn't add up.

So what I want you to do is I want you to continue to use the debt snowball method. As you are planning on how to pay off your debt focus on the debt snowball method. If you've been using the debt avalanche, go ahead, make that shift and come over to the bright side.

Go ahead and get those quick wins, those simple psychological victories that help you stick with the plan, because ultimately, even if the math is in your, in your favor - that tiny bit that it's in your favor - if you don't stick with it because you're stuck paying a long time on these other debts from the very beginning, it doesn't matter anyway because now you've quit and you're not making any progress. I want you to keep going, so use the debt snowball method and keep moving forward.

Now that we have all that broken down, I want to quickly remind you guys that I need your help and my goal is to help you in the midst of that.

So I've created a short 10 question survey that's designed to help me get to know you guys, what you need better so I can better serve you. That's going to be better YouTube videos, better podcast episodes, better coaching, better opt-ins, better products, better everything. My goal is to get better so I can better serve you. That's ultimately what it's all about.

All you have to do is go to, and you can get in on that 10 question survey to help me serve you better.

But more than that, you're also going to be entered in for a chance to win a $50 Amazon. Gift card. So whether you are a shopaholic, cause you know this shelter in place, shopping is real, or you just need to get some things for your family, a $50 Amazon gift card would be a phenomenal gift.

And I would love to see your name pop up when I do the raffled live on my YouTube channel at 1:00 PM on Wednesday, May 20th. So join me there live at 1:00 PM Central - y'all know I'm a Texas girl, we central... most of us. There's like a little corner that's not - but I want to see you there live. So again, head to so that you can submit your survey responses and get your chance to win that $50 Amazon gift card live on my YouTube channel. I can't wait to see you there.

Now that you know why you should stick with the debt snowball over the debt avalanche and how you can get a $50 gift card up out of me, it's almost time to get up out of here, but first, let's get connected on social media. You can find me on Instagram and Twitter with the handle tianabclewis, or you can find me on Facebook under selahfinancialcoaching.

Before you slide up out of here, let me know that you found this video useful, helpful, finally settled your spirit on which one is better by liking this video and subscribing to my channel. Once again, make sure that you hit the bell so you're notified every time I drop a new money tips and business strategies on Wednesdays and Saturdays.

Finally, if you're looking for more strategies that are going to help you come out of this coronavirus foolishness with a game plan that's actually going to help you live a life that you truly find worth living, I have a couple of videos right here that are absolutely perfect for you. So you get to watching the videos and I will talk to you later.

Bye bye.


Today, we used the Debt Reduction Calculator from Vertex42 to compare these debt payoff methods:

Want a chance to win a $50 Amazon gift card? Just answer 10 questions that will help me service women entrepreneurs just you like as you step out of the coronavirus craziness into America 2.0. We’ll raffle the gift card live on my YouTube channel on Wed., May 20th at 1:00pm CST:

Get more tips and strategies on creating a stellar budget here:

#debtsnowball #debtavalanche # howtopayoffdebt


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