Chapter 05 · Beginner · 5 min read
Paying off debt in the right order
Avalanche, snowball, and which one you'll stick to
Two proven methods, and why the one you finish beats the one that's optimal.
Avalanche: cheapest overall
List debts by interest rate, pay minimums on everything, then throw every spare euro at the highest rate. Mathematically this costs you the least.
Snowball: best for momentum
Attack the smallest balance first. You pay a little more interest but you clear whole debts quickly, and that feeling keeps people going.
Where investing fits
A common sequence: small cash cushion, then clear high-interest debt, then invest steadily. Low-rate debt such as a student loan or mortgage often runs alongside investing.
Words worth knowing
Open dictionary- Minimum payment
- The smallest amount that keeps an account in good standing.
- Avalanche method
- Repaying the highest interest rate first.
- Snowball method
- Repaying the smallest balance first.
What does the avalanche method prioritise?
Try it yourself
Write your debts twice: once by rate, once by size. Choose the list you'd actually follow.
Can you spot it?
Two debts: €4,000 at 4% and €600 at 24%. Which one does the avalanche method attack first?