Pick the Right Debt Payoff Plan for You: Snowball vs Stacking

debt snowball

So you are sitting looking at a stack of debt.  You wish you could close your eyes and it would all go away.  Unfortunately for it to go away you have to have a plan to pay it off and then follow the plan!

This seems like it should be rather easy to do, but the choices on exactly how to do this can be overwhelming.  Should you use a debt snowball or try your hand at debt stacking or is there some other option for you?  What are all these options anyway?

Here is a rundown on what your options are and how to decide what is best for you then implement your plan and get out of debt.

Debt Snowball


The debt snowball is where you list all of your debts in order from smallest to largest and then pay on the smallest debt first.  Once the small debt is paid off you put the payment from that debt plus the existing minimum payment and extra funds on the next smallest debt.  You continue this process until all of your debts are paid off.

Advantages: This method is great if you need lots of little wins and motivation along the way.

Disadvantages: You will end up paying more in interest charges on your debt.


Debt Stacking (or Avalanche)


In the debt stacking option you list all of your debts in order from highest interest rate to lowest interest rate and then pay on the debt with the highest rate first.  Like the debt snowball once each debt is paid off the payment moves to the next debt on the list until all your debt is paid off.

Advantages: This method will produce the smallest amount of interest paid.

Disadvantages: If your highest interest rate debt is also the biggest debt it will take you a while to get the satisfaction of finishing payment on a debt.


I Hate the Company


This is my official addition to the line up!  Sometimes you have companies you just don’t like and it drives you crazy that you should have to send them any money.  Move these companies to the top of the list for payment and then select either a debt snowball or debt stacking for the rest of your debts.  Negative energy can be very powerful in your mood and attitude towards paying off debt.  If you cringe every time you pay bills because you cannot stand the company – get rid of the company!  It is amazing what the elimination of negative energy can do for your progress.  When we were getting out of debt, I did this then followed it up with the debt stacking.


Selecting a Debt Payoff Plan


Knowing yourself is crucial to selecting the right plan.  Mathematically the best option is debt stacking.  Yet this could be a disastrous plan if you struggle with motivation, then the debt snowball may be best plan for you so that you are motivated by the little wins along the way.  You have to know yourself to be able to win at anything you do; selecting a plan because everyone else said to will not help you if you don’t function the way the plan works.

Ask yourself the following questions:

  • How am I motivated
  • How much time difference will it make in my payoff between each plan
  • Can I create other ways to stay motivated so I can use the debt stacking plan

After deciding on which plan fits your personality then begin to implement that plan.


How to Manage Your Debt Payoff Plan


There are many ways that you can manage your debt payoff plan.  Again, it is important to select the approach that works with your personality.  If you hate excel then choose one of the others, if you won’t go to a separate website then select paper and pen.  Determine which method you will use on a regular basis so that you can follow through.


This is the option that I used.  Today there are many excel templates that are available for download that have fancy formulas’ in them, but really it can be basic and simple.  For mine I only tracked the company, the original amount due, the interest rate, the original minimum payment, and current due.  Then once a month I updated the new balance plus the interest rate.  Do not adjust your minimum payment for credit cards as you want to continue paying on the original minimum to keep decreasing your debt faster.

Check out Vertex42.com for excel templates if you want one that is fancier!

Paper & Pen

You can do the exact same thing we just did in excel on paper.  Sometimes money can be more real when you have to write everything down instead of just typing it onto the computer.  Paper and pen is also great if you want to keep your list out in front of you for motivation.


Today we are lucky enough to have endless options on the internet that can help you track everything and do the math for you!  There are apps, online and offline software, calculators and more.  Below is just a small portion of the options that are available.

Mint – Mint has added some great tools to help you manage and plan for your future.

Quicken – I use quicken and have since 1998 because I like having control over my data.  The nice part of using the software is that it also allows you to create a budget and debt payoff plan right in the software.  This way when you record payments while balancing your checkbook it is automatically updated all in one location.  There is no need to head to another site to manage your debt payoff.

BankRate – Always a great site for financial calculators. This links to their debt payoff one.


Miscellaneous Things:


  • Before you can focus on what method you are going to use to pay off your debt you must first have enough money to pay above your minimum payments.  If you are not currently covering your minimum payments you instead need to focus on increasing income and reducing expenses so that you can begin making minimum payments.
  • It is more important that you are actually paying on your debt and making progress instead of worrying about what plan you are using.  The plan only works if you work the plan! (Click to tweet)
  • If you have lots of small debts ($0 – $300 range), it may be helpful to focus on getting them out of the way no matter the interest rate and then following the snowball or stacking plan.  This way you have fewer accounts to keep track of.

Creating a debt payoff plan that works does not have to be hard and overwhelming.  Understand each option and yourself then make the right decision for you!