How to Pay Off Debt Using the Debt Avalanche Method

If you are facing a mountain of debt, it can be overwhelming to even know how to start paying it off. In fact, one of the most common questions I get over on Instagram is “How do I even start?!”

One of the beginning steps to successfully digging yourself out of debt is to first create an action plan. You’ve got to decide on a method to pay off your debts, devise a plan, and then execute it. Having a plan in place helps you feel less overwhelmed and more in control of your finances. Simply knowing what debts to tackle and when can give you the confidence you need to start (and be successful during) your debt free journey.

So, what’s the best way to pay off debt? There are two schools of thought (did you hear Dwight Schrute’s voice when you read that? Because I totally did) to paying off debt. One is the Debt Snowball Method (which I love and use, by the way). The other is the Debt Avalanche Method.

In this post, I’m going to walk you through using the Debt Avalanche Method to destroy your debt like a warrior. Let’s dive in!

What is the Debt Avalanche?

With the Debt Avalanche, you pay off your debts from highest interest rate to lowest interest rate. You simply list all your debts, by interest rate, from largest to smallest. You pay minimums on all your debts. Then, you throw every extra penny you can find at the first debt on your list—the one with the largest interest rate. Once that debt is paid off, you take the amount you were sending to that debt (minimum + extra), and throw it at the second debt. You keep going until all your debt is paid.

With the Debt Avalanche, you pay off your debts from highest interest to lowest interest.

The idea is that you save money by paying off the most expensive debt first. When you focus on eliminating your high-interest debt first, you prevent more and more interest from piling up as you continue your debt free journey. You end up paying less overall to pay off all your debt. So, mathematically, the debt avalanche is known as a more efficient, cost-effective way to get out of debt than other approaches.

How to Start Your Own Debt Avalanche

I’ll walk you through the steps of starting your own debt avalanche. It’s easy!

In this tutorial, we are focusing on non-mortgage debt only, in accordance with Dave Ramsey’s Baby Steps. Paying off the mortgage will come later, after you’ve gotten rid of consumer debt and beefed up your emergency fund. Here’s a peek of the Baby Steps for those of you who may not be familiar with them.

Ok, back to paying off that debt with the Debt Avalanche!

STEP ONE. List all your non-mortgage debt, by interest rate, from largest to smallest. Don’t worry about total amount owed or monthly payments. Just list the debts from largest to smallest interest rates. You may want to consider pulling your credit report to make sure you get everything! You can pull yours for free, once a year, here.

STEP TWO. Make a zero-based budget to determine how much extra money you can send to debt each month, above the minimums. That’s the amount of money you will use to begin your debt avalanche. It doesn’t matter if it’s $100 or $10. Every little bit counts, and as you will see, the amount you send to any given debt will grow over time, as long as you just keep working the plan.

STEP THREE. Send minimum payments to all your debts.

STEP FOUR. Target the first debt on your list—the one with the highest interest rate. In addition to the minimum payment you sent to this debt in Step 3, send every extra penny you can find to this debt. Use your zero-based budget to help you figure out exactly how much you can send each month. (For a real glimpse into my zero-based budgets, head to the saved stores in my Instagram Page, under Budgets.)

STEP FIVE. Continue targeting the first debt, by sending in minimums plus every extra penny you can find until the first debt is paid off.

STEP SIX. When the first debt is paid off, take the full amount you were sending to that debt, (minimums + all the extra) and add it to the next debt on your list.

STEP SEVEN. Keep tackling debt, one at a time, with focused intensity, until all the debt is paid!

But, Wait! It’s Not Just About the Math

Advocates of the debt avalanche method say it makes the most sense mathematically. If you pay off your highest interest rate debt first, you’ll end up paying less overall in the long run.

But, successful debt reduction just isn’t solely about the numbers and math. Psychological factors and behavior play a big role in whether you’ll be successful in meeting your goals—and paying off your debt is no exception.

In fact, several scientific studies have shown that people actually have more success if they focus on paying off debts one at a time, from smallest to largest. This method is called the Debt Snowball Method and it’s the one I use and love.

But, as you’ve probably heard 1,000 times before, personal finance is, well, personal. What works for me may not work for you. That’s why I always say the best debt pay-off strategy is one that motivates you and one you will actually stick to!

Get Started on Your Own Debt Free Journey Today!

Get started with your own debt free journey today, by following the steps above, if you choose the avalanche method or the steps outlined here, if you choose the Debt Snowball Method. Whichever method you choose, I promise, once you get rolling, you will wish you would have started sooner!

RELATED: Six Things You Should Do BEFORE You Start Paying Off Debt.

I wish you tons of luck as you start paying off debt. Know that it will be difficult and challenging at times, but every sacrifice you make will be 100% worth it, when you are completely debt free!

If you have any questions about the debt avalanche, leave them in the comments below!!

So, what’s your favorite method to tackle your debt? Are you #TeamSnowball or #TeamAvalanche? Let me know in the comments down below!!

Want More?

And if you want even more information about how to successfully tackle debt, sign up to become a Living That Debt Free Life Insider! As an incentive to joining my email list, you’ll get my free six-page guide: Nine Proven Strategies to Paying Off Debt Faster Than You Ever Thought Possible. It walks you through the 9 steps my husband and I implemented which helped us pay off $68K in debt last year alone!

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