Debt repayment can feel like an unending, especially unique form of torture. You make your minimum payments every month, and yet the number you owe seems to shrink so, so slowly. Will it ever be paid off?

There are two common strategies that some experts say can help you pay down your debt faster. They’re called the snowball and avalanche strategies, and while they sound real cutesy, there’s some real tactical cleverness behind them.

Wanna learn what they are? We’ll tell ya!

Debt snowball and debt avalanche applications

The first thing to know is that these two strategies only work for folks with multiple debts. Maybe it’s a car loan and a credit card, or a handful of credit cards, or a line of credit and a personal loan. They both offer a strategy for tackling numerous debts more efficiently.

Both methods also require you to make payments in varying amounts. For this reason, they don’t work on debts like mortgages, which typically require a fixed payment on a fixed schedule.

Minimum payments suck

The second thing to know is that minimum payments are designed to keep you in debt longer.

What? Really? But don’t lenders want me to pay them back?

Yes, they do—but they want you to pay them back slowly, over a long period. This allows them to assess more interest charges and collect more from you over time. This is why debt can cost you more the longer you hold it.

So if you’re making only minimum payments on your debt, the first thing to do is consider if you could afford to accelerate your payment schedule. Even if you can only afford to up those payments by a few dollars, it could really help.

The interesting thing is both the snowball method and the avalanche method rely on minimum payments to work. In this scenario, the payments work more like maintenance fees while you work through your debt in stages. This is basically the only time making minimum payments on your debt might be reasonable.

What’s the debt snowball method?

The snowball method tackles the mental game of debt repayment.

In this strategy, you make your minimum payments on all of your debt except the smallest debt you hold. On this debt, you chuck any extra cash you have onto those payments.

If you hold three debts, one $1,000 debt, one  $700 debt, and one $100 debt, you’d make the minimum payments on the first two, but would make accelerated payments on the $100 debt.

The idea is that this can help enable you to pay off the smaller debts faster, which feels like a huge win. When you pay off your $100 debt, you start paying off your $700 debt at an accelerated rate. Lastly, you tackle your $1,000 debt in the same manner.

The “snowball” name comes from the momentum you build as you tick each debt off your list. According to a recent study from the Harvard Business Review, this repayment method is the best of the bunch, noting “focusing on paying down the account with the smallest balance tends to have the most powerful effect on people’s sense of progress – and therefore their motivation to continue paying down their debts.”

If you struggle with the mental commitment required to pay off your debt, this could be a great strategy for you.

The biggest criticism of this method is that by focusing on the debt with the smallest value, you may be letting other higher interest debts drag on, costing you more over time. You should review your interest rates to determine if this concern is relevant to you.

The avalanche method

Then there’s the snowball method’s big bro: the avalanche method.

Instead of tackling your smallest debt first, the avalanche method looks at the debt with the highest interest rate. This could be your smallest debt, your biggest debt, or the one smack in the middle; high interest rates can be what traps us in a debt cycle, so focusing on eliminating the debt with the highest interest rate is meant to reduce the cost of your debt over time.

Say we have the same debts: $1,000, $700, and $100. The first and third have the same interest rate, say 12%. But the $700 debt has a 24.99% interest rate.

A minimum payment on a $700 debt could be around $20 depending on your credit score. If you only made the minimum payment on that debt, it would take approximately 16 years and 4 months to pay it off, and you’d pay $1,098 in interest.

Yeah. You’d pay more in interest than the principal balance owing, and by the end, your debt would be old enough to hold a learner’s driver’s license in most parts of Canada.

By redirecting any extra funds to tackle that high interest debt first, you’re intending to shorten your repayment period and save money over time. If you have debt that has a high interest rate, the avalanche method could be perfect for you.

The challenge is that it takes real commitment and discipline to stay consistent in your debt payments, which is critical to the success of this strategy.

Which debt repayment strategy might be right for me?

Your circumstances are totally unique, so only you know which may be the best debt repayment strategy for you. But you can embrace a few helpful ideas that might make your journey to debt freedom a bit easier.

First, don’t take a loan from a company you don’t trust or with terms you don’t understand. Our friends at Mogo offer personal loans, for example—but their entire goal is to help borrowers pay their debt off ASAP. Check out their site to get a quick pre-approval that doesn’t impact your credit score and a transparent loan experience that will help you get debt-free faster, so you can get back to saving.¹

You could also consider debt consolidation. By obtaining a loan at a lower interest rate and using that loan to repay your other higher interest debts, you could save money in interest charges over time. You can read more about that here.

You might also hold the type of debt that doesn’t—strictly speaking—need to be paid down right away, like a student loan or a mortgage. Read more about that here.

Ultimately, the best debt repayment strategy is one you can stick to. Make more than your minimum payments if you can, pick a plan, and stick to it. You can be debt free—just keep at it.

Here, we take a look at how much you should really be spending on rent and food and what you can do to lower these fixed costs.

How much should I be paying per month on food? 

Eating. Groceries. Cooking. We all have a love-hate relationship with food for a myriad of reasons. Planning your next meal can sometimes be fun, while other times, not so much. No matter how or where we consume it, we’ve all wondered: am I spending too much on food?

There’s no one size fits all answer to how much should be spent on groceries since how much food you need varies from one household to the next. Your food needs may be different from those of your neighbour: for example, a family of two adults and four children will have different needs than a person living alone.

The Credit Counselling Society estimates that you should spend between 10 to 15% of your budget on food. This means between $4,000 and $6,000 per year for a person earning $40,000.

If you feel that your food expenses exceed this percentage, here are some tips to help you spend less in this category:

1. Cook in large batches: This not only saves you time but also prevents you from wasting food. You also avoid buying pre-made meals during your busier times.

2. Avoid pre-made meals: Cooking for yourself is not only healthier but also better for your wallet.

3. Shop around for specials: Always be on the lookout for price reductions to save money. To do this, try using the Flipp app, which scans local grocery store specials every week.

4. Avoid processed foods: These are generally more expensive than raw foods. It’s also  better to chop, grate or grind food yourself to save a few bucks.

5. Plan your meals for the week and make a list: Having a plan will help you manage your expenses and budget your grocery spending. 

Am I paying too much for rent?

Housing expenses (rent, utilities etc.) are a significant part of everyone’s budget, so it’s important to pay close attention  and how much you’re spending on them every month. 

Rent prices vary from one city to another. For example, the average price of a one bedroom apartment in Vancouver is 2,100$ per month, compared to 1,350$ in Montreal. So, be sure to use comparables with the options offered in the same city.

To make your search easier, try using Zumper. It’s both a search tool for available apartments and it analyzes their prices.

If you think you’re unable to find an apartment or rent price that fits your budget, you can  always try house hacking: find a friend,relative or  colleague to share your apartment.

This will not only reduce your rent costs but also allow you to split other bills, like heating, electricity, internet—and even some grocery expenses.

Remember, everyone’s personal situation is different, so the approach you choose should fit with your financial situation and life stage.

How can I manage my expenses?

Managing your expenses is a first step to achieving your financial goals. Understanding where your money is going will help you get a handle on what changes you need to make to ensure you’re living within your means and making your money work for your future.

To start, creating a spending plan is a useful tool to manage your expenses. To do so, you’ll need to track your spending so you can figure out where your money is  going every month. For a typical household budget, spending items are usually categorized into necessity expenses (essential expenses, like food) and discretionary expenses (non-essentials, like eye cream). 

Note that the non-essential expenses are the ones you can better control. The easiest way to reduce them is to do so gradually while balancing your quality of life.

Once you get a handle on  your spending habits, it will be easier for you to define your spending goals and set a  limit for each expense category, with the goal of  having cash leftover in your budget every month. 

You should also include a savings allocation in your spending plan to make sure that you don’t spend all of your money.

Once you’ve organized your budget plan, you should re-evaluate it every month to make sure that you’re on track.

Budget managing apps

There are a lot of apps out there that can help you manage your budget. They all have different methods and functionalities, so it’s important to understand what they offer and which features are most important to you.  

First up, we have Mint and Fudget. Both of these apps are free and user-friendly.  They use the estimated budget technique: at the beginning of the month, you estimate your expenses for each category. You then follow the monthly evolution of your estimated budget with what you’re actually spending and make adjustments as needed.

Mint also allows you to import your bank transactions automatically, making it much easier for you to manage your finances all in one place.

If you’re willing to shell out a few bucks, YNAB is also a great option for managing your budget. Just like Mint, it automatically imports and categorizes your transactions. The difference between the two apps is in the budgeting technique: YNAB uses an envelope method—a time-tested technique since before the invention of the computer!

What’s an envelope method? We know you’re at the edge of your seats so we won’t keep you in suspense: with the envelope method you assign  a job to each of the dollars you earn. By doing this, you categorize your available money instead of basing it on the money you think you earn. You then spend according to the money you have available.

As added value, YNAB also offers educational content such as podcasts and blogs, so you can keep learning about how to gain control of your money.