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Debt Snowball vs. Debt Avalanche: What's the Difference?

Paying down debt is one of the first steps to take in the journey to financial flexibility and freedom. If you're ready to make a dent in debt, following a well-defined plan will help you stay motivated to reach your goals.

Two popular debt reduction strategies are the “debt snowball" and the “debt avalanche." Do you know the difference between these two methods? Let's take a closer look!

The debt snowball method

With the debt snowball method, you list all your debts in order from the smallest to largest balance due. Then, make the minimum monthly payments on all your debts—except the one with the smallest balance. Focus your attention on this account, using any extra money in your budget to tackle that debt.

Once you pay this first account completely off, shift your focus to the next smallest debt, adding your payments from the first debt to this one. As you gain momentum and get the “snowball" rolling, it will become easier to eventually pay off all your debt!

The debt avalanche method

Much like the debt snowball method, this approach starts with listing all your debts in order and focusing on one debt at a time. However, this time, you begin by paying off the debts with the highest interest rates first. The longer you leave these debts unpaid, the more they'll cost you in interest over time. With the debt avalanche method, it may take you a while to eliminate the first debt, but you'll save money in the long run.

As you can see, the main difference between the debt snowball and debt avalanche approaches is the order you choose to pay off your debts.

No matter the method you choose, it is good to start by filling out a Debt Inventory Worksheet. With this handy tool, you list out all your debts, due dates and amounts so you get a clear snapshot of where you stand. You can also take advantage of our Money Management Tool within WPCU's Mobile and Online Banking, which offers ways to help organize and manage your debt.

Are you ready to get ahead—and stay ahead—of your debt? WPCU is here to help you meet your goals and start down the path to financial flexibility and freedom! We're pleased to offer members free budgeting and debt counseling through our partnership with GreenPath Financial Wellness. Together, we'll explore which debt reduction strategy might work for you and what tools are available to help.

Contact GreenPath 24 hours a day 7 days a week at (888) 893-2713. Reach out to your local Member Center and talk to a Financial Coach to get started today!