Pay Off Debt – The Hybrid Debt Snowball Fight

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My wife and I are entering week 6 of Dave Ramsey’s 13 week Financial Peace University course.

Though prior to attending FPU classes we had already built up a healthy anger toward our past deficits… joining FPU put us over the edge and helped equip us for the inevitable Debt Snowball Fight we would soon find ourselves smack dab in the middle of!

3 Things We’ve Solidified after 5 weeks of class:

  • We finally nailed down a solid budget – We were operating by a “loose budget” but it was not nearly as sustainable or accurate as what we have now.  For those who have been trying for months to nail down their budget – don’t give up – it took us 10 months, but now we have one and we LOVE it.
  • We implemented the cash envelope system – We are using this in tandem with our Spending Journals and absolutely love it.  I found unabashedly that understanding how well this curbs spending cannot be realized without practicing it first hand.  We still record every purchase but only use our Spending journals to record debit card transactions, while all cash transactions are recorded on the outside of each individual cash envelope category.  I will be writing about this in greater detail soon.
  • We officially started our debt snowballToday’s featured topic. Dave Ramsey (“make personal finance personal”) suggests the “debt snowball” method of debt repayment over the “high interest first” method.  Dave’s general debt repayment rule of thumb is good for people who want a set-it-and-forget-it plan – and for people who thrive on the emotional “big wins.”  Personally, just having the plan in place is the emotional win for me. Don’t get me wrong!  I will leap for joy as each debt is paid off.  But boy do I love it when a financial plan comes together!

Accelerated Debt Repayment – It’s a Fight!

Debt Snowball fights with those you owe can hurt if you don’t carefully plan your strategy.  Using the proper accelerated repayment program will save you thousands and leave your creditors eating snow!

The Debt Snowball, Debt Avalanche, Debt Tsunami, and Debt Snowflake are all good repayment strategies… just make sure you pick the one that fits your situation and run with it!  Debt repayment isn’t a game… it’s an all out war!  Your creditors will bring their A-game to try and keep you in debt until you pass on to go be with the Lord.  What are you gonna do about it?

Here is what works for us…

Our Debt Repayment Strategy

Despite the fact that I am drawn to a strict mathematical solution, it looks like I will end up employing a hybrid debt repayment strategy.  A combination of the high interest strategy, and the amounts owed (debt snowball) strategy.

Of these three plans I choose – The Jabs Hybrid Solution:

The Debt Snowball Solution
The Highest Interst Rate Solution
The Jabs Hybrid Solution
Lending Club Loan – least owed
Lending Club Loan – highestLending Club Loan
His Student Loan2nd Mortgage2nd Mortgage
Her Student Loan
His Student Loan
His Student Loan
2nd Mortgage1st MortgageHer Student Loan
1st Mortgage – most owedHer Student Loan – lowest1st Mortgage

How Much Money and Time I’ll Save

For those of you who do not know, Dave Ramsey – creator of the Financial Peace University course we are currently taking – advises FPU participants to pay off their debt according to The Debt Snowball plan (paying debts in order from smallest to largest.)

I calculated it out last night and found we will save $1,878.31 by paying off our 2nd mortgage before my student loan… even though it carries a larger balance.  Not only will we save nearly $2k, we will also pay off the both loans two months earlier that we would by using The Debt Snowball plan.

Do What Works for You!

To help discover your best repayment plan of attack, use these two calculators:

I didn’t pick my method of accelerated debt repayment because it is the best solution for everyone… I chose it because based on the mathematics, The Jabs Hybrid Solution of debt reduction works best for our situation.  You need to do the same.

Photo courtesy of Princeton University Archives

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1 Miranda

I think the key is to do what works for you. There are many different plans out there, and you can decide what will be best for your situation — including your emotional state. We don’t like to think of money and emotions, but the fact of the matter is that the two are intertwined. So you also have to think about what you can handle emotionally when it comes to debt repayment, and the plan you use.

2 Matt Jabs

“We don’t like to think of money and emotions, but the fact of the matter is that the two are intertwined. So you also have to think about what you can handle emotionally when it comes to debt repayment…”

Very well said Miranda… thank you.

3 Angie

I wonder how much doing this together would help with my fiance and I. We were on a good track paying back debt. But sometimes I just think he doesn’t care enough to get it. Always asking for things we shouldn’t never doing anything frugal. Pretty much its up to me to keep us in track but usually he makes me feel guilty and I give in.

We have a long way to go in debt repayment and I know the only way we can get through it sooner rather then later is to be on the same track. But he seems to be under the mentality of enjoy the now.

4 Matt Kelly

Angie, You asked the question because you know the answer – it’s imperative for you and your fiance to do this together. Personal finance can act like a wedge, driving you apart, or a magnet, pulling you together.

I believe that the key to having personal finances act like a magnet is to have a shared dream that pulls you toward the same goal. With a shared goal you can use the same compass to determine if your decisions are getting you closer or father away from your dream.

5 Matt Jabs

Hi Angie: what Matt Kelly said is spot on… you will not be able to tackle these formidable foes until you and your fiance are wholly on the same page. Please keep in mind that the best way to win him over is by appealing to his desire to “rescue you.” Men have a built in desire to rescue the love of their life… and if given the opportunity nearly any man will jump at the chance. To give him this chance you need to show him your vulnerability in sincerely conveying how important the matter is to you – not in a commanding, brash, or forceful way, but in a meek and loving way. When you approach him in this manner you will be utterly amazed at his response!

Use this open door of communication to ask him to attend Dave Ramsey’s Financial Peace University with you. Prior to approaching him do your leg work and find a nearby location where and when the classes will be offered. To find them, follow this link and enter your zip code.

I HIGHLY and STRONGLY recommend you two get on the same page financially BEFORE you tie the knot. Attending this class will get you there and will be a blessing to you throughout your marriage.


6 Peter

One thing that a lot of people forget about Dave Ramsey is that he always says “You can’t go wrong getting out of debt”, so if you’re knocking out your debts – even if it isn’t in a strict debt snowball, I’m sure he would approve.

Go get ’em! (just try not to get a black eye like the guys in your picture above! ) 🙂

7 Matt Jabs

Correct Pete. Maybe I should clarify that I am a huge supporter of Dave Ramsey. I understand that he has to generalize his system in order to deliver the best system for the majority. I am a firm believer that Dave absolutely wants us to calculate what is best in each of our own individual situations.

Thank you for bringing this up. I totally crush on D.R. and strongly support the great work God is doing through him.

8 Jason @ My Money Minute

When you have balances that are sky-high, like student loans & 2nd mortgages, it makes sense to go by interest rate. The point of a snowball is to pay off small balances, get quick wins, and CHANGE YOUR HABITS. When you can change your habits, then you can start dealing with what works mathematically.

9 Matt Jabs

Great advice Jason, I concur. Everyone HAS to calculate out the best plan for their situation.

10 BG

Just want to chime in and mention that Dave Ramsey’s “debt snowball” plan is not the quickest or cheapest way to get out of debt. The high-interest first plan will get you out of debt quicker and with less dollars spent in interest (in the end, if you make it to the end).

BUT, Dave Ramsey’s snowball will (mathematically) reduce risk by increasing cashflow the fastest. It reduces the number of bills you have faster than any other method. If you are completely swamped with bills, with practically nothing left over, can’t sleep at night, you really should follow Dave’s snowball and knock out the smallest balance debts first to improve your monthly cashflow picture (which helps you deal with unexpected expenses / reduces risk). Another benefit of Dave’s plan is that it is easy to stick to, with the numerous (small) wins up front for a nice psychological boost that people actually need (I did).

If you are not in debt “up to your eyeballs”, and have a decent positive monthly cashflow, then the optimal payment plan is to pay the highest-interest debts off first. You need to have the will-power to stick with that payment plan, as you might not knock off the first debt for quite a long time.

11 BG

“I calculated it out last night and found we will save $1,878.31 by paying off our 2nd mortgage before my student loan… even though it carries a larger balance. Not only will we save nearly $2k, we will also pay off the both loans two months earlier that we would by using The Debt Snowball plan.”

I suspect if you follow Dave’s plan, you would knock out both student loans earlier than you would knock out the second mortgage under the highest-interest first plan. The question is, do you need the monthly cashflow from the His & Her student loans during that time-period?

Dave’s plan has a price (in this case $2k), so would you rather buy “peace of mind” for $2k, by knocking out both student loans earlier (reducing bills / fastest increase of monthly cashflow), or not buy the “peace of mind” and pocket the $2k interest savings? — only you can answer that.

12 Matt Jabs

@BG: What you mention does not apply to our situation, our student loan debt combined is actually 1.625 times what our 2nd mortgage debt is.

Our cash flow is strong and having only 5 debts left (all paid automatically) makes your valid point a non-issue for our circumstance.

Great though provoking argument for others in that situation to consider.

13 Lynn

Its great to just have a plan! Just an aside – and not knowing your tax situation – did you take into account the tax ramifications of paying off the 2nd mortgage and student loans? For me, we can’t deduct the student loan interest so we are paying that off before the 2nd mortgage since the interest is tax deductible.

14 BG

Lynn: very good point — how taxes are applied can change things. If you can get a tax deduction for certain debts, then calculate the lower “effective” interest rate on that debt if you are following the high-interest first plan. It could possibly reorder your debt payoff list to squeeze out another few hundred in interest savings.

As for Dave Ramsey’s snowball — you still would want to attack the lowest balances first (always ignore interest and “effective” interest rates), since the goal with the “debt snowball” is (in my opinion) to reduce risk and increase cashflow quickly.

@Matt: I followed a hybrid approach as well, but somewhat opposite of what you are doing. I used the “snowball” initially, until my cashflow was where I wanted it, then switched over to highest-interest first at the end to save some interest. Anyhow, you are following the spirit of the payoff schemes by focusing all attention on a single goal at a time.

15 Matt Jabs

Aha! Thank you Lynn… I have been waiting for someone to ask this question.

I was working on nailing down calculations that included tax ramifications last night but did not get to finish because I had to write this post. What I am doing is continuing to check into the exact calculations for my situation tonight… then I planned on releasing the update tomorrow!

Since the maximum interest deduction for student loans is $2,500 for married filing jointly (which is faulty since singles get the same benefit and you cannot claim student loan interest at all if you choose married filing separately) this could very well change the rules of the game entirely.

So… stay tuned to DFA tomorrow to see what my calculations expose and whether or not it will be enough to negate the $1,800+ I stand to realize by indeed following the above repayment plan.

16 JoeTaxpayer

BG – no doubt it works (Dave’s way), but for Dave to suggest any other way is wrong is what I find irksome. If Dave’s success rate for snowball is even 100%, and High Interest first is only 25%, it still implies that HI works for some. He should not rule out a method that works.

17 BG

Joe: I think you are correct in saying that the snowball has a higher success rate than HI. Higher success rate means better, at least to me.

I’m the first to admit that the snowball plan “costs” you more in interest payments, but if it has a higher success rate, perhaps it is worth that extra cost? Anyhow, from what I remember in FPU, is that Dave does actually talk about the HI plan (not like he is hiding it), and goes into the reasons why he thinks the snowball is a better plan (mostly the phsycological benefits of early/quick wins). Perhaps Matt can confirm.

I haven’t heard him say that the HI plan was “wrong”, do you have the context for that statement? I personally thing all variants for debt-payoff strategies have their pros/cons and each are valid in certain situations. People even have strategies to _not_ payoff debt early, and that is valid as well (in certain instances).

18 Matt Jabs

From what I remember, Dave does push Debt Snowball because of its higher success rate, but we also have to remember that the people who typically go to FPU are the type who have very little financial discipline… so it is no wonder the HI approach has a lower rate of success.

I’m sure Dave would encourage anyone with the discipline to successfully follow through with the HI approach to take that route… after all, his main concern is getting people out of debt in whatever way works best for them.

19 Financial Samurai

Good luck Matt! Now that you’ve got a solid plan, it’s just a matter of time.

Dave’s “course” isn’t going to cost you any money to enroll right?

20 Matt Jabs

Dave’s FPU course costs $100 for us as a couple – for a 13 week feature rich and complete personal finances program structured around bible wisdom. It sets out to get you and your spouse on the same page financially and spiritually, which is huge.

You only have to pay for the program once, then you can go take it again at any location for free. I highly recommend it.

It is actually a phenomenal value, and a miniscule price to pay for what is received.

21 Financial Samurai

Sounds good Matt. $100 doesn’t seem like a lot for a lifetime of learning.

BTW, I think it’s important to celebrate but also recognize there are 131,000 homeless veterans in America as today is Veterans day.

Please help spread the word to raise awareness. Thnx.

22 Heather H.

Interested to hear more about your techniques in using the envelope system. I have a good written budget, a husband who loves to break it, (he’s definately the free spirit in the family)and a terrible debit card addiction. I am the person who never has cash in their pocket, so I’m looking forward to a tutorial of sorts….It does seem awfully silly to use your debit card for tiny $1.50 purchases sometimes doesn’t it?

23 Matt Jabs

Hey Heather. My advice to you is to appeal to your husband, and explain to him how important it is for you to gain better control over the finances, but that you cannot do it by yourself and you covet and need his help. The sooner he gets on board the better.

I will be posting our envelope/spending journal system and am quite excited about it.


24 Joe Plemon

Hey Matt,

Love the post and the explanation of the “hybrid” debt snowball. Also the plug for FPU. I agree that Dave, while promoting his “smallest to largest” version, would applaud anyone who has the discipline and motivation to get rid of their debt.

One point about the DR version that I don’t think anyone has mentioned: many, when they start experiencing those quick wins, will get so enthused they will make further sacrifices and thus get out of debt even quicker.

25 JoeTaxpayer

One more remark on Dave. This is from his site,

“Myth: I should pay off the debt with the highest interest rate first to get out of debt quickly.
Truth: You should pay off the smallest debt first to create the greatest momentum in your debt snowball.”

I’ll accept BG’s point, that great feelings can be created by knocking off the 2 $1000 cards for the fact that this frees up say, $100/mo in required payments. I understand that money is emotional (80% as Dave says? Ida know the percentage.) I object to the wording of his Myth statement.
I can state that even though it’s a fact that high interest first will wring out the most savings, that I am open to the fact that the success rate of DS is higher, over time more people are better off using it. Is it half (better off) 75%, I don’t know that either. What I do know is that one can calculate the cost either way and decide whether High Interest or Low Balance is right for them.

I try very hard not to judge people, although I have to gauge their risk tolerance and discipline. I find that absolute statements such as Dave’s myth can be harmful.

26 BG

Knocking off the low balance debt first accomplishes:

1) The number of bills you pay a month goes down the fastest

2) Monthly cashflow increases the fastest (since required payments are gone)

3) Risk is reduced the fastest: can’t have a paid-off car repo’d, can’t be late on a paid-off credit card, etc. Plus the extra cashflow can meet (surprise) needs that would’ve been an emergency before.

4) and Dave’s favorite: psychological boosts from the early wins

The first three are mathematically quantifiable, and I could prove that the snowball beats HI if those are the goals. Number 4 is psychological (and not mathematically quantifiable), but if we use the weight-loss analogy that was mentioned below: which diet would you choose:

A) lose 2 pounds a month, every month
B) lose 30 pounds a year, but not a single pound until after 12 months

Mathematically, diet B is superior (30 lbs in a year -versus- 24 lbs). But it takes sheer willpower to follow plan B. The snowball is more like plan A with the early positive feedback that makes it the easier to follow diet (hence would have a higher success rate). If you quit after 6 months, at least you lost 12 pounds on plan A, instead of 0 on plan B.

With that link you posted, I don’t think that Dave is arguing that the snowball is the _fastest_ way to get out of debt — but, instead it is the _best_ way to get out of debt…

27 Curtis

Ah, that must be why I received a little more from you last month in the lending club account.

28 Lakita


I also use a hybrid system of highest interest & smallest balance. There is definitely something to be said about focusing on the “wins” as Dave describes it.

About a year ago I listed all debts. I then focused on the 3 with the highest interest (I call those dangerous debts…all well over the national average). From there…I used the debt snowball to pay off from smallest to largest as if those where my only debts….of course I continued to make minimum payments on the other few.

Now that those are gone, I’ve reviewed the statements for those that are left. I am creating my plan for 2010 and it’s on!


29 Mr. Not the Jet Set

Matt – Even as an FPU facilitator, I’m not sure I’d get in too big a twist over your hybrid solution.

Like many of Dave’s teachings, many are quick to stray or theorize their own improved solutions – which is fine. What is important is to understand Dave’s intent. Here, it is a step up strategy that gains momentum, similar to weight loss. It’s easier to loose weight if your goals are 2 lbs, 4 lbs, 6 lbs, 10 lbs, 20 lbs, as opposed to going from 2 lbs to 20 lbs, then 6lbs.

Without knowing your numbers (and I don’t need to know), my concern would be that the 2nd mortgage moved all the way up from second to last on the list to second on the list. Having too high of goals without enough momentum can make it difficult to stick with.

30 Kevin@OutOfYourRut

Matt, I like how you not only presented different debt plans, but you also created and chose a hybrid too. What ever plan we chose it will have to be one that fits us specifically. “One size fits all” usually fit no one.

Admitting that it took you 10 months is also reassuring. Few of us can stop what we’ve been doing for years and reform in just a few days. This might expain why new years resolutions seldom survive January.

Good post!

31 Matt Jabs

All great points. A few things to consider:

1. My student loan, her student loan, and the 2nd mortgage are all fairly close in amounts, so I truly do not think taking one over the other for length of payment will make much difference… so it is wise to instead choose the one with the highest rate and since the 2nd mortgage is more than double the rate of her student loan and nearly 50% higher than my student loan, it’s a no-brainer.

At the end of the day, if you can stick to the plan – regardless of how long it will take – then HI is the best option. If your debt amounts differ greatly, and you gain necessary momentum by killing the smallest ones first, regardless of rate, then do that.

For pete’s sake… do whatever works – just make sure you get rid of that debt!! 🙂

32 Dominique Brown


My debt repayment strategy was heavily influenced by Dave Ramsey’s approach 2-3 years ago when I felt I didn’t have the discipline to implement a strategy that was mathematically correct. (Nothing against the debt snowball, I recommend it to all my friends). My hybrid method now encompasses payment amount, interest rate and estimated pay off time. I call it the “modified snowball” For example.. we decided to pay off our car loan prior to student loan because the car loans free up more monthly capital even though the principal owed was higher (Not by much).

33 Matt Jabs

Sounds like a “solid snowball” Dominique. It’s important for us to help more people should understand that Dave’s plan is a spring board for each of our own customized plans that best suit our unique situations. Congrats on your plan and progress.

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