Alternatives to the Debt Snowball

So now was the time to see what to pay off next. Would it be the next smallest loan – a $6k loan of mine? Or would it be a slightly larger one that has a $250 monthly payment? We ran the numbers to decide. I used a handy app called Debt Payoff Pro, which lets you custom order you debts. I looked at a bunch of scenarios: highest interest first, lowest interest first, highest balance first, lowest balance first, highest payment first, lowest payment first (this is the typical snowball), and a custom deal which alternated highest and lowest payments.

By paying off those four small loans, we now have a $100 debt snowball. However, as we start tackling larger and larger loans, we might be able to decrease our total pay off time by attacking the one monster interest rate loan. Or maybe, for comfort’s sake, we want to attack the one with the biggest monthly payment, because that brings us a step closer to only needing one income.

As my husband and I discussed the significant progress we’ve made in the past few months (four loans paid off, one just yesterday), we realized we were at a decision point. It was easy to pay of those little loans, because we would get a bonus here or a reimbursement there and realize “this is enough to pay off our smallest loan”. And so in that regard, we have been doing the debt snowball.

This is not a significant difference. Interest charges over the time were a bit more variable, but still within a similar range of 10-15k. What I was more concerned about was motivation to keep going. When would we pay off our next loan? Well, by using the alternating high and low balance pay-offs, we would pay off our next loan in 2016, and the one after that in 2017. For the recommended cases of paying off the lowest balance and paying off the highest interest rate, we would have to wait over 4 more years until a loan was paid off! Talk about feeling defeated!! No way. So, we are choosing a very custom approach and will continue to monitor every time we pay off a loan.

No matter the scenario, with our current snowball (more on that later), I found that the loans would be paid off between June to August of 2021.

Side note: we have no intention of waiting until next year to pay off the next loan. We will be using refunds, bonuses, side hustles, and yard sales to make that happen this year. Side note, plus: I have our balance and payment information and will be adding a page that tracks this.

Our company has increased the amount the will match toward our 401K contribution. Last year, they matched 100% of the first 3%. Now, they also match 50% of the next 2%, for a total of 4% matched. Hubs took care of his increase a few weeks ago, and I never did. But it’s done now! While we were at it, I realized I had left some money on the table.

I estimated, after taxes, we had $50 extra dollars a month. Bam! Our debt snowball just got 50% larger. And as we talked about our debt snowball, I realized that our healthcare was cheaper this year too. 

Summing it up:

Don’t blindly follow the debt pay off advice of any guru. There are many alternatives to the debt snowball, so take a look to see what works best for you, your debts, and your motivation.

make sure your are looking at all the ways your money is already working for you – and take advantage!