
Harvard Study Shows Snowball Method Best Way to Get Out of Debt - humblebuck
https://www.humblebuck.com/get-rid-of-your-debt/
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blastb
The snowball method is nice in that it frees up monthly cash flow due to
having to pay fewer minimum payments. In these situations, it can certainly be
good.

But in order to minimize payments overall, assuming you have no cash flow
issues and self discipline, it's financially optimal to pay off your highest
interest debt first (the avalanche method). I'm guessing it might feel
psychologically better to pay off smaller debts as each of those paid off is a
win, but it's financially irresponsible to recommend the snowball method to
everyone.

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humblebuck
Thanks for the feedback, when I originally wrote this I actually detailed the
stack method (same as avalanche). From my perspective it doesn't matter if you
pay off a $100 credit card, but have $14,900 left in debt. You haven't really
improved your situation.

But after reading the results of the Harvard study I had to change the whole
step. It turns out the psychological impact of seeing the size of the
reduction on your smallest debt balance had staying power and kept people
paying down debt.

So I agree it's the most logical to pay the stack/avalanche method, but
unfortunately we're all just a bunch of moist robots who don't always follow
logic.

Really appreciate the concern though, I was on your side before I ran into the
study!

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justboxing
Here's the actual Harvard Study that the article references => "Research: The
Best Strategy for Paying Off Credit Card Debt" :
[https://hbr.org/2016/12/research-the-best-strategy-for-
payin...](https://hbr.org/2016/12/research-the-best-strategy-for-paying-off-
credit-card-debt)

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humblebuck
Ouch, trying to simplify and help, but I can see how it could come off wrong.
Thanks for the note.

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t0mbstone
sofi.com doesn't have loan consolidation fees. I consolidated $40k worth of
credit card debt into one loan at 8% interest and have been paying it down at
like $1000 a month.

This method only makes sense if you also figure out how to control your credit
card spending in the first place.

I opened two checking accounts and set up direct deposit split between them.

One checking account receives the exact amount of money I need for all of my
monthly expenses (according to a budget), and the other checking account
receives the extra money which I have allocated for "fun" spending.

The snowball method never worked for me.

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humblebuck
Good for you on taking the action to get rid of debt and I agree the snowball
method doesn't work for everyone, it just works for a higher percentage of
people.

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trendia
> There’s typically fee’s associated with opening them.

This is a typo. It should read: "There are typically fees associated with
opening them."

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humblebuck
Great point! Thanks for taking the time to send the note!

