Quick Answer: A debt snowball spreadsheet tracks paying off debts from smallest to largest balance regardless of interest rates, providing psychological motivation through quick wins. This approach makes less mathematical sense than paying highest interest first, but offers better emotional encouragement for those who need milestone victories to stay committed long-term.
“Dear Steve,
Which is better to pay off a credit card with the higher rate first …or a second credit card…lower balance but lower interest..what is the best way to get them off of me.
I have heard pay off the one with the biggest interest first and I have also heard you pay off the credit card with the smaller balance first..Please advise…trying hard to get out of debt. Thanks so much,
Robert”
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Dear Robert,
The answer is ‘Yes.’
Both are equally valid ways. One makes great mathematical sense and one makes better motivational sense.
If you think you are not the type of person that can make a long term plan and execute it without encouragement along the way, then prioritize your debt according to smallest balance. There is no better feeling to know you have one less creditor to pay next month and can now pile on that former minimum payment to your next creditor.
The approach is often called the debt snowball approach.
Some guys I know run a free service to help people develop a plan to get out of debt and then they help to automate it. Take a look at the free service at ReadyForZero.com and let me know if that approach would be beneficial for you.
I actually have a number of calculators you can use online for free, right here. I think the Debt Snowball Calculator will be a big help in your plans.
Please post your responses and follow-up messages to me on this in the comments section below.
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