How to Pay Off Debt - Avalanche, Snowball, or Snowflake?

by Zarine, REALTOR® 05/26/2019

Like most Americans, you probably carry some debt. Reaching your dreams such as saving for a down payment or registering for a class takes longer when you're also paying on money you owe. Paying it off might seem daunting when the only way you know is to either make more money or reduce expenses. There are other ways, though, to tackle debt. Here are three.

The avalanche

When using the avalanche method to pay off debt, organize debt by the highest interest rate to the lowest. Any extra funds you can come up with go toward the debt with the highest interest rate until it is paid off. Then, move to the debt with the next highest interest rate. Take the whole payment amount of the first debt and add it to the payment of the second highest debt, paying it much more quickly. As each debt is paid, move to the next highest interest rate until all debt is paid. Proponents of this method believe your debt is paid off faster with the least amount of interest paid.

The Snowball

This popular method to pay off debt focuses on paying off the smallest debts first, then taking that payment and adding it to the payment for the next lowest debt. As you pay each debt, add that payment amount to the next smallest debt's payment. Each time you pay off one debt, the amount you can throw at the subsequent debt increases in the same way a snowball rolling down a hill gets bigger and bigger. Eventually, you can apply the final amount to your last debt and pay it off more quickly. Champions of this method believe paying off smaller debts first provides a psychological boost, encouraging you to stay on track. 

The snowflake

Both the avalanche method and the snowball method rely on your coming up with some extra cash in your monthly budget to throw at the first debt. But what if your budget is so tight that you can't add a regular amount to your monthly outgo? The snowflake method is different. Always pay minimums on all your debts, but whenever you have random cash, apply the extra to the smallest bill. So, if you sell something online or if a friend pays you back for dinner from a month ago, apply that extra to your smallest debt. Use birthday money, the five dollars you found in a coat pocket, or your tax refund to pay toward debt. Even though you’re not adding a regular amount to your debt payment, you can still reduce the balance and pay off your debt more quickly than by just making payments.

Reach your dreams

Once you’ve paid off your debt, continue to pay the final payment amount into a savings account toward a down payment or some other goal.

About the Author
Author

Zarine, REALTOR®

With over two decades of real estate industry experience, Zarine focuses on the San Francisco Bay Area marketplace. From single family homes, condos, townhouses to multi-family residences. She works extensively with investors to upgrade, remodel sell residential and commercial properties. She has consistently been in the top 5 agents out of over 300 agents in the Company.

Zarine has been a Bay Area resident since 1977. She has been active in real estate since 1988. In addition to helping buyers and sellers find their dream home, Zarine and her husband Neville started investing in Real Estate in the Bay Area since 1978. They own and maintain several rental properties and also regularly purchase, fix, and sell homes. They have a team of contractors, landscapers, and tradespeople that they can recommend. They built our own home from scratch and worked closely with the architect in the vision and design. Together, they are involved in every aspect of real estate and live it daily.

Having traveled extensively around the world, Zarine is able to accommodate each of her clients’ unique needs, and prides herself on being a strong listener and communicator. Zarine’ s communication skills are an integral part of her success in real estate. She meets clients from all walks of life and dedicates herself to understanding each of their needs and goals. Zarine and Neville love what they do and have won several awards over the years. They are dedicated and have been with J.F.Finnegan brokers since 1995. In turn their clients are loyal as 95% of their business is from referrals. Real estate is more than just a profession to them; it is their hobby and passion.

PERSONAL INTERESTS:

Originally from Bombay, Zarine and Neville go back to India to visit family. They have travelled extensively around the world and love their annual escape to Maui. Zarine enjoys cooking, entertaining, gardening, reading, movies, and life! They have two daughters who live in San Francisco and their joy in their life are their three grandchildren.

AWARDS:

  • 2016 Emerald Elite #2 in the whole Company
  • 2015 Emerald Elite # 3 in the whole Company
  • 2014 Platinum Award #5 in the Company
  • 2013 Emerald Elite #1 Team in the Company
  • 2012 Platinum Award #1 Team in the Company
  • 2011 Platinum Award #1 Team in the Company
  • 2010 Masters Award #1 Team in the Company
  • Consistently Among the top 3 individual agents of over 300 agents at BHG
  • Chairman's Circle (Consistent Winners 2001, 2002, 2003,2004,2005,2006,2007,2008,2009)
  • Winners of SAMCAR “SAMMY AWARDS”
  • San Mateo Association of Realtors (SAMCAR),California Association of Realtors (CAR), National Association of Realtors (NAR) San Jose Apartment Owners Association
  • Fine Homes Specialists, E Certified, Bankers Preferred Mortgage, CARTUS Relocation Certified