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Debt Avalanche Method

financial · medium · 1 hour for initial planning; 30 minutes monthly

What is Debt Avalanche Method?

Pay off debts from highest interest rate to lowest, minimizing total interest paid over time. Mathematically optimal but requires more discipline since the first debt to pay off may be the largest.

Is there evidence for it?

EVIDENCEstrong

How do you do Debt Avalanche Method?

  1. 1.List all debts ordered by interest rate from highest to lowest
  2. 2.Make minimum payments on all debts except the one with the highest interest rate
  3. 3.Direct all extra money toward the highest-interest debt
  4. 4.Once that debt is paid off, redirect its payment to the next highest-interest debt
  5. 5.Calculate total interest saved vs the snowball method to stay motivated by the math

How long does it take?

1 hour for initial planning; 30 minutes monthly.

Is it hard to start?

medium.

Source: Standard financial planning recommendation. Saves the most money over time compared to snowball method. Harvard Business Review and multiple financial studies confirm the mathematical advantage, though behavioral research favors snowball for completion rates.
debt-repayment · interest-rate · mathematically-optimal · long-term-savings · discipline
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