Best Pay Off Method: Debt Snowball, Lasso, and Avalanche?

What’s the best method to speed up your debt free plan? Today we’ll review three ways to tackle your debt and break down how to find the best one for you! 

Debt Snowball, Lasso, and Avalanche: Which is the Best Debt Pay Off Method?

Welcome to the first episode of Money Decoded! I’m Elle Martinez. 

This series is all about explaining and in some cases debunking terms, ideas, and advice talked about in the personal finance space. 

While there are times when these terms can be helpful I’ve also seen where families instead are confused by them. 

I want to break things down so that you can have an easier time when it comes to making the best decision for your family and finances.

Today we’re talking about a popular goal families have when it comes to their finances – paying off debt. 

Two of the most popular ones are the debt snowball and avalanche, but there aren’t the only ones. Being in the personal finance space for over 11 years, I felt like I heard them all. 

You have debt lasso, snowflakes, , blah, blah – you get the idea. 

There’s plenty to choose from. 

The challenge is how do you find the right one for you? 

Today, we're going to be talking about a goal that many families have, which is paying off their debt.

I've been writing in the personal finance space for over a decade and I've seen so many different methods.

We have the debt, snowball, avalanche lasso, snowflakes, you name it, but the confusing part and the challenge is finding the best fit for you.

Finding the right debt-free plan for you is key because when you find one that fits you, your budget and the timeline that you're going for, you're more likely to stick with it and hit your goals.

Why don't we jump right in and talk about the differences between some of the big popular ones that have worked for families?

How Debt Snowball, Lasso, and Avalanche Work

Because we're dealing with a lot of numbers. I thought it would be easier just to put up on screen this example of a family that has plenty of deaths trying to tackle.

• Credit #1: 
  • Balance: $5,300
  • Interest Rate: 17%
  • Min. Payment: $106
• Credit #2: 
  • Balance: $2,000
  • Interest Rate: 14%
  • Min. Payment: $40

• IOU to a Friend – $80
• Car Loan:
  • Balance: $13,000
  • Interest Rate: 7%
  • Min. Payment: $257
• Student Loan
  • Balance: $34,000
  • Interest Rate: 5%
  • Min. Payment: $194

Let's see how they would pay these off with each of the methods.

Debt Snowball

The first one we're going to be looking at is the debt snowball. The debt snowball is associated with Dave Ramsey.

With this method, you're going to take all your non-mortgage debts and you're going to list them from smallest to largest amount owed.

Then, you're going to pay the minimums on all of these, except for the one, which is the smallest. Any extra money you have, whether it's an extra 50, 100, 200, 300, – whatever it is – a month that you can put towards that debt you would.

As you pay off that particular debt, you then take that money you were putting towards that and rolling it over to the next one.

You continue this method till all your non-mortgage debt is paid off.

Debt Avalanche

The second method is the debt avalanche. You are going to be listing your debts one by one as well, but you're ranking them from highest interest rate to lowest interest rate.

You're trying to pay off the high interest debt first and just like what the debt, snowball method, what you're doing is paying the minimum on all, but one putting all that extra money that you have towards it, till it is paid off, then rolling that over to the next debt until all of your non-mortgage debts are paid off.

Debt Lasso

The last one is the debt lasso. This one is the hybrid of the two, because you're looking at the interest rate and the debt amounts.

How this is approached is that you are consolidating if you can, or using a balanced transfer program for high interest, like your credit cards so that you get them lowered enough.

Then you start using the debt snowball method because now you're focused on the amounts and this was created by the debt free guys when they had $50,000 of credit card debt.

It allowed them to pay off their debts faster than if they went with either the debt snowball or the debt avalanche.

Which Debt Free Plan is Best for Us?

Now that you have a better idea of the different methods, which one is going to be a good fit for you?

As you were listening to the explanations, you may already have been pulled to one of the methods.

My best advice is to go ahead and try it out.

The good news is even though they have slightly different approaches, there's a lot of key principles that apply, especially the fact that you're focusing in on one debt at a time, and that you're automating a lot of this process.

It is easy to try one out for a few months, see if it's a good fit and if not simply switching over.

I feel like all three of these methods are great. You're not losing by deciding to go with one over the other. Again, what is the best fit for you?

If you're still stumped on which method is right for you, I suggest starting out with the debt snowball.

One of the reasons it's been successful for many families is that those small wins up front with a smaller debts, gave them a boost and motivation to keep going.

If you can use that to propel yourself forward to becoming debt free, then go for it.

Get Started on Your Debt Payoff Plan

Understanding the financial terms is a great step in the right direction, but if you really want to have some wins with your finances, you got to take action.

So here are a few things that you can do this week.

Refinance or Negotiate Your High Interest Debt To Get a Lower Rate

The first is if you have high interest debts, see if you can get that lowered.

I mentioned with the debt lasso that they talk about doing a balance transfer. And if that's an option for you where you can get one for 12 to 18 months, and you know that you're not going to use those credit cards again, that is an option, but it's not your only one.

You can look at ways to consolidate and lower your interest rate. You can go to your local bank or credit union and see if you can refinance them as well.

Commit to Your Debt Pay Off Plan

The second step is, decide on a plan. Make sure that you commit at least for four months on this plan. Then you can reevaluate if it's the right fit for you or if you need to adjust it,.

You have to give it time to get into a rhythm and to start making progress.

Keep a Visual Reminder

The third tip I would give to you is have a visual reminder of both your progress and what you are working towards.

This is a great way to reinforce that habit and stay motivated. Now paying off debt is a great financial goal, but what's your motivation? What do you hope to do once you become debt free?

For some families it's to be able to have some flexibility with work so they can have more time at home. Others are looking to pivot their career, maybe start a business. It could be a mix of both. Maybe you have a dream of traveling more.

Whatever it is, have a visual reminder of that particular goal and also your progress. That way you can keep each other motivated on your debt-free plan.

Automate Your Finances

My last tip is after you decided which path you're going to take with your debt-free plan, make sure you automate your finances.

Willpower alone isn't enough. I know for us having automated payments was incredibly helpful because we have full lives between work, the kids and other responsibilities.

It can be easy to forget some of the smaller details. So by automating it, you know, that your money is working for you and moving towards your goals.

I hope these tips help you hit your debt-free goals faster and stay motivated while you do it.

Thanks so much for joining me!

If you have a question you want to have me tackle in a future episode, make sure you leave a comment below with your question and hit the subscribe button.

I hope you have a wonderful day. Take care!