Debt Snowball + Avalanche - How I Paid Off $30k of Student Loans

[@dethmaul]

THANK YOU. You actually showed the damn totals going down for ALL the debts, not just the theoretical one you're starting with. And you showed the monthly totals, not ignored the entire rest of the debt. This is the first actually relevant video on the damned snowball I've found. The other ones suck.

[@APennyPlan]

Thank you!!! I realized I had always heard about these payment options, but never saw it broken down. I'm glad I was able to convey it helpfully!

[@bevoburn]

i did a avalanchy snowball. I just paid the lowest debt bill to highest so i was bouncing back and forth from low and high intrest loans. All is left is 1 credit card and 1 car loan. feels good.

[@AleshaMarieTV]

This was by far the best, most in depth video i've see on youtube explaining and breaking down the debt snowball and avalanche methods!! You did such a great job with this.

[@APennyPlan]

This is one of the nicest comments I've ever received. Thank you so much...it made my day!!

[@ChrisInvests]

This is great to see people actually trying to pay off their loans. Too many people just accept being in debt. I recently started my channel on personal finance to help teach people the basics of money. Liked and subscribed 👍

[@APennyPlan]

Agreed! Debt is super normalized and it takes a lot to change those perceptions. Thanks for subscribing...I just subscribed to your channel as well!

[@ChrisInvests]

A Penny Plan thank you! New KZbinrs need to support each other 😀

[@mayralugo-case514]

I enjoyed your video about the debt snowball vs the debt avalanche. It was very informative and it gave me a reason to pay off my credit cards by using the debt snowball method. Next, I will apply the same method to my student loans:

[@APennyPlan]

Thanks! I'm glad to hear it was helpful. Good luck paying off your credit cards and student loans...you can do it!

[@kittyp979]

Oh my god thanks so much for this video! I’ve never understood this whole method until now. 💗

[@APennyPlan]

YAY! I'm so glad it was helpful!!!

[@kathrynlujajohnson8792]

Finally found a good and simple explanation of these two methods! Thanks so much! Think I'm going to use the debt avalanche for my student loans.

[@kathymchale6053]

I have low income....yeah I'm a teacher....but I am going to try and get a second job to pay this debt off so I can use the money after loans are paid to go towards retirement ....thanks for the breakdown

[@APennyPlan]

Good luck! The extra job / sacrifice is only temporary. Just think of how much more you'll have to put towards your goals once you don't have those monthly debt payments. You've got this!

[@Latoshajsinspiration]

Thanks for sharing. The debt snowball makes you accomplish paying off your smallest debts faster. In the grand scheme of things it makes more sense to use the debt avalanche which Dave Ramsey has mentioned,but not by name. He mentioned the method in a KZbin video I saw. He always mentions the debt snowball by name everytime I have seen a KZbin video of him talking about paying off debt. Anyway,congratulations on paying off your student loans. Have a great rest of your day.

[@so.many.obstacles]

I’m going to start off with snowball to tackle the the smallest of items and then switch over to avalanche. I have two items that total less than $350, so I will snowball that and then tackle my high interest rate items.

[@LeaRaesWay]

Ohhhhh ok. I started a debt snowball (just started with February 2019’s check. I didn’t realize that you pay the minimums for the rest. I get it now.

[@APennyPlan]

Yeah. It sounds simple at first, but I realized I never really heard anyone break it down in detail...so that's why I made this video. I hope it's helpful 😊

[@abe2571]

Go for it. We just finished paying off all our debt (cards, car loan, medical) except the house. Started Dec 2017. Used the debt snowball. It's more behavior then numbers per say. On to the emergency fund now.

[@AmberU]

Im going to follow the DR Plan so it will be the snowball method for me ( I need a win every now and then). But thank you very much for explaining it I definitely have a better grasp. The Avalanche method may come into play later though.

[@APennyPlan]

Awesome! I'm glad the video was helpful. Either method works, as long as you commit to paying off your debt. You can do it! 😊

[@periannelouissaint1992]

How do you go about it? Call my loan holder each month and tell them how I am going to pay? What are the exact next steps?

[@qcspt]

Thank you for making this video. I'd been wondering if snowball or avalanche was for me and I'm going to give avalanche a go.

[@APennyPlan]

You can do it! 👍

[@rolofrangipan3719]

Isn't the method the same? The only difference is the order that you pay them off?

[@bdbaseball17]

She isn't taking the interest accumulated into account so she can simplify the math. The debt avalanche method is the mathematically superior choice. You pay less money because the higher interest rate debts spend less time accumulating interest. The debt snowball is the better choice psychologically. You pay off smaller debts faster and it provides a sense of accomplishment that some people need to stay on plan.

[@StandupGirl-ym3ey]

THEE best explanation !!

[@dalicism]

So, I get that this was just demonstrative, but it leaves out the interest calculations month to month which leaves out the real power of the avalanche over the snowball. Constructed this way, without the interest, the total repayment will be the same in both scenarios since it is just repaying the principal on the total loans.

[@APennyPlan]

Yes, it is just an example on the methodology - how to decide on an order for loan repayment, how to divide up your snowball/avalanche between the different loans, and the general psychology and goals behind each method 😊 I'm not advocating for any method in particular, just trying to explain some basics for anyone unfamiliar or new to the concepts.

[@iamOAKland]

Dale Callahan this is just a demonstration which is very helpful to get a better understanding because lots of people mindframes on this subject is elementary.

[@barbmcconnaughey3070]

This takes longer because of the monthly interest added by the lender.

[@apope06]

It depends on the type of loan too. If you have like a payday loan of 125%...better use Avalanche. Or even like a 25% credit card...

[@APennyPlan]

Agreed! There is definitely a mathematical advantage to the avalanche in almost all cases.

[@keltonmcguinness821]

How is the interest applied? Is your total loan amount multiplied by the interest rate to get the amount you have written down for each loan?

[@AmberU]

I think the Avalanche method for my student loans would be better since there are varying rates on them.

[@XFizzlepop-Berrytwist]

I dont know if it would be worth trying to consolidate them? Like take all the loans 4% and above, and try to get a bank to pay them off, and then you owe the bank all that money at a lower interest rate of 4%.

[@evmazz67]

This is a good thought on paper. I know it is realistic for many, but it assumes that you are not charging anything else or even spending much, which is unrealistic for me. Are there other ways of cracking down on debt while still enjoying life and spending money?

[@APennyPlan]

For sure! Your snowball/avalanche amount would just be smaller (and your timeline longer) since you'd be prioritizing other parts of your budget. The biggest recommendations I'd say would be not to take on any NEW debt + see if there are ways to save on your current expenses (ex: eating out once a week vs. every day, tightening up your grocery budget, etc.). That way you can still make progress, but not sacrifice everything you enjoy...it's about finding balance! I'd check out Shay Budgets - she's really big on that kind of mindset 👍

[@evmazz67]

@@APennyPlan thank you. I find it more difficult to budget due to the fact that I dont have set income or pay schedule.

[@catisfactionist]

Hi great video! I just have a question! Should I pay the loan with highest the interest rate first? Was there a reason you did not pay the highest interest one first in the example? Thank you!

[@APennyPlan]

Highest interest rate first would be the "debt avalanche" method. Paying off highest interest rate vs. lowest balance (snowball method) is up to you and your personal totals, goals, etc. I would check out undebt.it/ to plug in your numbers and see how fast you can pay things off/how much you can save with the different methods. It's a really cool tool!

[@sandraamerson1484]

Hi. Did you figure out the interest after each payment? It sounds hard

[@FratorityRow]

Hi - thanks for explaining so thoroughly and being so positive. Very helpful! I’m a little confused about the surface math though - you said you paid off $30k in loans in about 1-1.5 years? Was that with $1000 per month or was that just hypothetical for the example? Otherwise how is that possible - that would be $1000 x 18months = $18,000. If my math is wrong, please let me know - I would love to pay off my loans in such a short time! Thanks for inspiring me to me more disciplined about how I pay off my debts!

[@APennyPlan]

I did a video on my exact numbers here: kzbin.info/www/bejne/qna7kp5-qcZqndE 😊 Quick summary: I lived at home rent-free for the first six months after graduating, which let me put WAY more towards my loans. After I moved out, I dropped to paying ~$1k/month. So the AVERAGE over 17 months was ~$1.7k/month, but the ACTUAL payments were like $3k/month for 5 months, $1k/month for 12 months, and a boost of $3kish from my tax refund. I am thankful for the circumstances that let me pay off things so quickly! And the habits I built then now help me save like crazy. Stay the course on your debt payoff...it's worth it! 🎉

[@FratorityRow]

I see - that makes a lot of sense! Thanks for breaking it down for me! :)

[@budgetkat6022]

Subscribed... Great video :)

[@apogeus2]

good, useful video

[@sharris2321]

What about the interest?? It's the NEVER ENDING interest that compounds which is the problem

[@APennyPlan]

My student loan interest was negligible, because the interest rates were so low. If you have high interest rates (like with credit cards or car loans), then the debt avalanche is mathematically superior. The debt snowball is often more emotionally satisfying, because you can potentially knock out smaller debt balances fast.

[@ShelbyAlexis1]

Think I'm going to do the avalanche method. but my only question is does it matter between sub and unsub loans ?

[@APennyPlan]

It's my understanding that unsubsidized loans accrue interest from the moment you borrow, while subsidized start accruing after the grace period. If you're out of the grace period and doing the avalanche method, then you would pay whichever has the highest interest rate.

[@DarkBlueNutrition]

So the 1,000 was the amount you used to pay off your loans that fast? I don’t think I can afford to do it this quickly... but I have a very similar number in student loans, and I feel like it’s hovering over my head. It makes me feel helpless! That said this video truly helped and at least made me feel like I have a grasp on what to do. 💙 thank you!

[@APennyPlan]

I used $1000 for this example because it was a nice round number 😊 My actual payments ranged over the months...really high when I lived at home for six months without bills + when I got my tax refund, but a lot lower when I moved out and started budgeting. While it's nice to be done with debt, it's not a race and there's nothing wrong with going at your own pace 🙌 You can do it!

[@EllaM58]

check out dave ramsey he really shows you how to get out of debt, he has a book 'the total money make over' with 7 baby steps on getting out of debt and living financially free

[@liesha7495]

There are free debt calculators online which will give you the breakdowns on how much intrest you will pay and how long it will take using either method. It helped me decide how much my minimum snowball would be and helped my decide what method to use (I choose Snowball to keep me motivated). I will pay off my first credit card at the end of this month and if I be a tight arse, next month I will have a loan paid off. It will take me at least 8 months to have my next credit card paid off 😞 I am hoping I can stay motivated.

[@iamOAKland]

Dark Blue Nutrition you use what’s extra from you income after all your bills. Actually it’s very rare that people start off with $1k so that’s not realistic. An extra $100 to start with will work too. It’s not an overnight thing either.. it will take time.

[@lakeisharhyant2045]

How can I manage these methods when I am doing auto payments for my student loans? My loan servicer disperses my minimum payment on my loans. I want to do the snowball method because my loan is high and I will be more motivated. If I knock my flowers amounts out first. My lower amounts are also my highest interest. I want to pay extra. I have my servicer take the money out automatically so I can get a lower interest rate.

[@APennyPlan]

It differs between loan servicers. In my case, I had my automatic payments scheduled for the interest rate discount + to ensure I didn't miss a payment. Then I would schedule a later payment manually and select which loan I wanted that payment to go towards. You want to be sure any extra payments are applied specifically to the loan you are attacking with your "snowball". You also want them to apply to the principal, NOT paying ahead for future due dates (this is more common with auto loans, but you just want to double check). Good luck...you've got this!

[@Charles_ONeal]

I went with the avalanche because most of my larger loans were lower interest anyway.

[@TheBabcocks]

How long did it take to pay off your loan with the avalanche method? This was a good explanation of both and how to attack the loan.

[@APennyPlan]

Thank you! It took me about 17 months. I paid off $15k in the first 5 months, because I lived at home for free. Then I moved out and paid the remaining $15k over the next 12 months 😊

[@rchavez5056]

You should be so proud. 👍

[@APennyPlan]

Thank you! I am proud and grateful! 🙏

[@micg04]

loan minimums don't change month by month (amortization is already factored in), but, yes, credit card minimums do. while your math is correct, it is not as accurate to use the word "loan" for the snowball.

[@APennyPlan]

Interesting! My student loan minimums definitely changed over time, but I had some unsubsidized ones + enrolled in autopay, which reduced my interest rates. Thanks for the insight 👍

[@tiffanyrockwell2115]

what is the month difference between each payoff method...which way would make the loans be paid off faster

[@APennyPlan]

In theory, the debt avalanche would be faster because you pay less interest and therefore less overall 😊

[@loujon191]

Thank you

[@trickydicky78s3]

given loan 2 was just 5 dollars more it wouldve made sense to hit that first and save the extra1% interest being charged then hit loan 1 but each to their own ways :)

[@APennyPlan]

Yep 👍 I paid my loans using the avalanche method in order to avoid as much interest as I could 😊 This video is meant more as an example of the methods...maybe I'll make a more in-depth video on different scenarios!

[@janiceashley9771]

THANKS SO VERY MUCH.😀😀😀😀 NOW I KNOW HOW TO TACKLE MY CREDIT CARD ACCOUNTS. I DO NOT HAVE MUCH MONEY TO TO WORK WITH BUT NOW I KNOW BOTH SYSTEMS, ITS SURE A GOOD START. THANKS AGAIN. 😀😀

[@APennyPlan]

Yes!! Just starting is already putting you WAY ahead most people. You can do it!!

[@forevergogo]

Missing the interest that is applied each month. I think my loans are on a 20 year repayment plan, and the mortgage is a traditional 30. Things are so tight I can't afford to do anything more than the minimum right now... and that is usually somewhere between ten and twenty dollars on each loan principal and then about the same in interest. but when I Do get extra money in, I intend to start doing the Ramsey debt snowball. And I'm prioritizing IOU's I've had with the parents for years First, then moving from smallest to largest. I don't think most people would be able to pay over $10,000 in 45 days like you did either. I've thrown an extra $200 to $500 at my highest interest loans a few times over the past few years and gotten 2 of them paid off, but again- that's over the course of like 3 years.. a total of about $7000. Maybe this is just more possible with married people who have two incomes and just 1 roof. Us single people are financially fucked for life.

[@APennyPlan]

This is just an example video using my real student loan numbers as the starting point 👍 It took me about 17 months to pay everything off, and I was living at home for the first 5 months which helped A LOT (no rent, utilities, etc.). I did not pay off $10k in 45 days! 😱 I'll do a video soon of my actual numbers, but all I had to pay off was student loans during this time frame. No mortgage (currently saving for a down payment), no car payment (car was a paid-off 2010 truck), no credit cards, etc. It can definitely feel daunting being single...but then you see dual income households struggling, people with six figures struggling, etc. Having more money doesn't help if you just spend it all 😞 But anyways!! Progress is progress, and you putting ANY extra money towards debt is already more than most people do. Best of luck to you! I'm happy to help in any way I can, outside of this basic video which really just shows HOW the snowball/avalanche works, not all the nuances that go into debt payoff 👀 Thanks for watching!

[@forevergogo]

Best of luck saving for that down payment!! I found out late in the closing process (would have had to start all over on closing and possibly lose the house I wanted!) - When you put down 20%, you do Not need an Escrow. So if you are GOOD at budgeting, and get your numbers at closing and feel Confident, you don't have to hassle with Escrow, and can potentially earn Some interest off your money put away all year long until it is time to pay the big bills like insurances and taxes. At least, that is how its done here in Texas. Might be different for you, find a Good realtor and really go over Everything thoroughly you want clarification on as a first time home buyer.

[@APennyPlan]

Thank you for the insight! I'm actually in Texas as well!! But I will definitely do some research as it gets closer to that time. I'm nervous just thinking about it LOL so I will be very careful!

[@iamOAKland]

Check out Denzel Rodriguez channel education content with Velocity Banking

[@martavillanueva1062]

Augh! Could you zoom in next time? Hee-heee, cute snowman.

[@APennyPlan]

Yes! Or I will write bigger haha. My setup is very basic right now...but I'll figure it out for next time! :)

[@mtncruiser]

Factor in the interest!!! In reality it doesn't happen this fast at all! Your so called Avalanche would be the faster of the 2 methods but would still be many more months than you show in your video.

[@APennyPlan]

It took me an average of 2.5 months to pay off each of my loans using the avalanche method 😊 There are a lot of different factors that go into the timing of the payoff, but the purpose of this video is to show how to organize your loan order and payments for each method. I just used my loan numbers as an example.

[@MadMax-hi9bq]

the title says that you paid off $30K..... but the video shows examples/scenarios/assumptions.....HMMM...i get what your doing ...i watch ramses videos hes the best...avalanche NO work...snowball much betta....LOL

[@APennyPlan]

These are my real loan amounts, I just rounded payments to make it an easier example. You can see my exact payments here: kzbin.info/www/bejne/qna7kp5-qcZqndE I technically used the avalanche, but the snowball is very useful as well. I paid these off fast enough that there was barely a difference in savings between the two :)