Paying Off Debt Comes Down to Whether You Run on Math or Momentum

If you owe money in several places, the hardest question is often which debt to pay first. The Consumer Financial Protection Bureau (CFPB) has a short answer. Pick one of two basic strategies, write the plan down and keep an eye on your due dates.¹

The advice comes from a 2019 CFPB blog post by Courtney-Rose Dantus. It now sits in the agency’s archive with a note that it may be outdated, but the strategies are general and long-standing.¹ Credit counselors and lenders describe the same two methods.³⁴ The CFPB’s starting point is simple: getting out of debt is possible once you know what you owe and what you can do to repay it.¹

Here is how to put that into practice, starting this week.

1. Gather your paperwork. Pull together copies of your bills and your interest payment information. You’ll need both for the planning worksheet in step five.¹

2. Learn the highest interest rate method. With this approach, you focus on the debts with the highest interest rates, such as credit card and student loan debt, and pay them off as fast as you can, because they cost you the most.¹ Many other sources call this the debt avalanche.³ The CFPB is upfront about the catch: it may not feel like progress at first, but it can save money in the long run.¹

3. Learn the snowball method. Keep making the minimum payment on every debt, and send any extra money to the one with the smallest balance. When that one is gone, the money you were paying on it goes to the next smallest debt, creating a “snowball” of payments.¹² Small debts get cleared quickly, which shows progress. The trade-off, according to the CFPB, is that you may pay more in the long run because larger or more costly debts aren’t targeted first.¹

4. Choose based on what keeps you going. The CFPB ties the choice to motivation. If saving the most money is what drives you, it suggests the highest interest rate method. If seeing quick progress keeps you going, it suggests the snowball.¹ The National Foundation for Credit Counseling offers similar guidance, saying the snowball is usually best for people who struggle with motivation.³ Navy Federal Credit Union calls both methods effective.⁴ Experian notes that results depend on each person’s situation, and the snowball can sometimes match or beat the avalanche on interest and time.⁵ In other words, each method is a trade-off, and sources differ on which is best.

5. Fill out the free worksheet. The CFPB’s reducing debt worksheet is a free PDF from its Your Money, Your Goals toolkit. You pick a strategy, then list your debts in order: highest rate to lowest, or smallest balance to largest. For each one, you record the lender, the amount borrowed, the amount still owed, the monthly payment, any extra payment, the due date and the payoff date.²

6. Roll the whole payment forward. When a debt is paid off, the worksheet says to move the entire payment, both the monthly payment and the extra payment, to the next debt on your list.²

7. Put every due date on a calendar. The CFPB’s third step is using its bill calendar to see all your bills and when they are due.¹

The post is part of the CFPB’s Get a Handle on Debt series, which also covers budgeting, tracking spending, paying bills on time and earning extra income.¹

Neither method makes debt vanish overnight. But a list on paper, in an order you chose, turns a vague worry into a set of payments you can cross off one at a time.