Why Your Debt Strategy Matters: Avalanche vs. Snowball

For many young Canadians, debt feels like a constant weight. It's the student loan you're still paying off, the credit card balance that creeps up, or the car loan that feels like it will never end. The stress can be overwhelming, and it's the single biggest obstacle to building wealth.

But getting out of debt isn't just about willpower; it's about having a smart, clear strategy. At Northern Lights Money, the Debt Freedom Plan is Step 2 of our "Northern Lights Pathway" for a reason: you have to clear away the storm clouds of high-interest debt before you can see the clear sky ahead. The two most powerful strategies to do this are the Debt Avalanche and the Debt Snowball. Let's break them down.

The Core Concept: The Payment Snowball

Before we compare the two methods, it's important to understand the one thing they have in common: the "payment snowball." This is the engine that powers your progress.

It works like this: you take all your current minimum debt payments, add an "extra payment" amount that you can afford, and that becomes your total monthly debt payment. You attack one debt at a time with all your extra cash. When that first debt is eliminated, you take its minimum payment and "roll it up" into the payment for the next debt. Your total monthly payment never changes, it just gets more and more powerful as you go.

Strategy 1: The Debt Avalanche (The "Math" Method)

The Debt Avalanche is the most mathematically efficient way to pay off debt. The strategy is simple: you focus all your extra payments on the debt with the **highest interest rate** first, while making minimum payments on everything else. Once that debt is gone, you take its entire payment and apply it to the debt with the next-highest interest rate.

• Pro: Saves you the most money in interest over time.
• Con: It can sometimes feel like a slow start if your highest-interest debt also has a very large balance.

Strategy 2: The Debt Snowball (The "Motivation" Method)

The Debt Snowball is designed for psychological wins. With this strategy, you focus all your extra payments on the debt with the **smallest balance** first, regardless of the interest rate. Once you eliminate that first small debt, you get a quick, powerful hit of motivation. You then take its freed-up payment and apply it to the next-smallest debt.

• Pro: Delivers quick, motivating wins that help you build momentum and stick with the plan.
• Con: You will almost always pay more in total interest compared to the Avalanche method.

Which is Right for You? The Power of Choice

So, which is better? The truth is, there is no single "right" answer. The best plan is the one you will actually stick with.

• If you are a numbers-driven person who wants the most efficient path, the **Debt Avalanche** is likely for you.
• If you need those quick wins to stay motivated, the **Debt Snowball** is a fantastic choice.