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Debt Payoff Methods: Stacking And Snowball

January 20, 2022
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More than 80% of Americans have debt. While it may not always feel like a problem, debt pre-occupies your income, and high interest and fees can hinder you from getting ahead financially. In fact, many people don’t have any significant emergency savings, which means they are one unexpected financial trial away from long-term financial hardship. Debt payoff is so important to set yourself on a path toward financial wellness. If you want to pay off your debt more quickly, you need a strategy. 

Methods for Debt Payoff 

There are two primary debt payoff strategies: the stacking method and the snowball method. 

The Snowball Method

Using the snowball method is easy. Simply list all of your debts from smallest to largest, and each month pay as much money as you can towards the smallest and only make minimum payments on the rest. When you pay off the smallest debt, roll all the money that went towards the smallest to the next smallest.  As you pay off each debt, the amount of money you have to pay towards the next will snowball larger and larger until you pay all of your debts. 

The Stacking Method

The stacking method works the same way as the snowball method, but you prioritize your debts differently in this method. Rather than listing them from smallest to largest, list them from highest interest rate to lowest interest rate regardless of the dollar amount. You then pay each as described in the snowball method. 

Which Method is Best?

The stacking method is superior if you’re strictly looking at dollars and cents. When you pay off the debts based on the highest-interest first, you save more money in the long run that would otherwise be paid towards costly interest payments. The advantage of the snowball method is that you generally will begin to see progress very quickly as you knock out your smallest debts. This, in turn, gives you the emotional reward you need to keep on paying your larger debts. When choosing which method is best for you, it’s essential to honestly evaluate your particular personality and situation. If you are someone who can stick with a task even when you don’t see an immediate reward, then the stacking method may work best for you. On the other hand, if you need to see results quickly to keep yourself motivated, then the snowball method may be best for you.

Debt Payoff: The Path to Financial Success

Paying off debt is the first and most crucial step in setting yourself up for long-term financial success and wellness. One of your tool belt’s most critical financial tools is your income. When you tie up your income in high-interest monthly debt payments, it’s challenging to get ahead, build your savings, and plan for the future.  You free up your income for your long-term goals, ambitions, and dreams by paying off debt. Financial wellness is ultimately financial freedom!
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