The ‘Debt Avalanche’ Method is Effing Amazing

A childhood friend of mine has been in town these past four days and it’s been wonderful to reconnect as adults. I’ve been in Austin for three years and have a great circle of friends here but this girl has known me since ballet class at age 6. It’s a different kind of relationship when someone has known you for decades.

As we caught up on our lives the talk turned towards money. While discussing salary amounts might still be taboo, people always love to talk about how expensive everything is and what they could do with just a bit more cash. I learned that my friend has a little pile of student loan debt and that she’s getting more and more serious about paying it off. Of course, that’s music to my ears.

I listened to her story- she is a PhD and graduated this past May. After getting through four years of undergrad, a year of Master’s classes and four years as a PhD student, my friend is walking away with a totally reasonable amount of debt. She’s got a load in the 20K range, which is awesome considering just how much school she’s been through.

Still, no one likes debt. I actually hate it. So I was more than happy to share my own debt payoff story, some tips and tricks I used and the one method I found to be the most effective in paying off debt rapidly.

The debt avalanche method is effing amazing. For the unfamiliar, the debt avalanche method is a method of payoff that states you should focus all extra payments on one debt in particular, rather than spread the extra money out across multiple debts. Additionally it says that you should make that loan of focus your highest interest debt.

By paying down your highest interest debt first you’ll save money in the long term. This is because you’ll pay less in interest over time, meaning more money stays in your pocket.

I had five student loans in total, held by two different companies. I followed the debt avalanche method in paying those down and it was the best advice I could have taken.

Not only did following the debt avalanche method jumpstart my payoff efforts, it gave me a plan to follow. It simplified the entire process. No longer did I have to think about which loan to apply my extra cash to- it automatically went to the highest interest loan. When that loan was done I simply moved onto the next highest interest one.

This method definitely also saved me money. I had to take a six month deferment on my loans in 2014 and during that time, interest just piled up. By taking action on my loans from an interest based point I was able to make some headway on that interest and ensure that there was less of a chance for interest to get too high.

I combined the debt avalanche method with making multiple payments a month. This also gave interest less of a chance to pile up. My interest accrued daily, so if I made a payment on Monday, the interest reset on Tuesday. By making another payment on Friday of that same week when interest had only had Tuesday-Friday to accrue, I was able to pay more off the principle.

Explaining this to my friend and making some recommendations about debt payoff was really fun for me. I love talking about debt and having been through it, I’m always eager to share my own story and what worked for me. So if anyone out there wants to talk, shoot me an email! I’m happy to look at your situation and offer help if I can. Screw debt!

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9 Replies to “The ‘Debt Avalanche’ Method is Effing Amazing”

  1. I’ve used this method but modified it to pay off smallest debts first instead of higher interest. It help me become SUPER motivated. I love the feeling of throwing massive amounts of cash at debts because you really see the impact instead of just barely making a dent by trying to work on all the goals at once.

    1. That’s the debt snowball method! Also a great tool. The Avalanche one spoke to me because of my hatred of interest but the snowball is also great

  2. So awesome you got the chance to share some of what you’ve learned with your friend — and seriously, $20K from a PhD?! Wow. I am not sure if the approach was already named the “debt avalanche” or not when I was paying off my debt, but at one time I had a car loan, a student loan (which had been consolidated from four loans), and credit card debt, and you better believe I attacked that high interest CC debt first! Then the car loan. Then the student loan. So totally agree with you on the avalanche method. I can see the psychological appeal of the snowball method for people who have a hard time staying focused and motivated, but like you, I wanted to know that I was stretching my money as far as it would go, and that meant going avalanche all the way. 🙂

    1. Team Avalanche! It was the right choice for me. I love hearing about your former debt and how you are not naturally frugal because it’s so inspiring. I get frustrated and scared that it’s already too late for me to reach FIRE sometimes. Then I remember people make changes at all ages and from all sorts of experiences. You’ve paid off debt, changed some not so frugal habits and will be retired before 40- so awesome!

      1. $38K of debt when I barely earned $30K — it was not nothing! So don’t lose heart. Gathering momentum is the hardest part, and then it gets a lot easier to keep going.

        1. Wow! Your story is even more inspiring then, because I know you make a more comfortable salary now. You paid off a ton of debt and increased your income. So cool! Gives me hope!

  3. I’m using the avalanche method to pay off my debt right now. It can be tough since you may to see an impact as quickly as if you were using the snowball method, but it’s much better to try and keep as much of your money as possible instead of giving it all to the banks if the form of interest. Good job paying off your debt!

    1. I agree, keeping the max amount of money that I could was my goal. Good luck with your debt. I’m proof that it works!

  4. […] relationship with money. I started tracking and challenging all my spending. I started using the debt avalanche method for my payments. I asked for raises I deserved, so I could make more money and pay off my debt […]

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