Home > Managing Debt > The Debt Diet Challenge Week #6: Debt Reduction by Snowball … or Avalanche?

Comments 0 Comments

The Debt Diet is an online behavioral change program to help users get out of debt by putting aside $10 a day.  It was developed by Pro-Change Behavior Systems and Jean Chatzky, author of the best-selling Pay It Down and a coach on The Debt Diet series on the Oprah show.

Jean Chatzky read the applications solicited by Credit.com and chose 5 participants.  She got them started on The Debt Diet and is now speaking to them once a week, answering their questions and helping them to get off to a good start.  For their part, our participants are doing The Debt Diet exercises, which include tracking their spending, negotiating monthly bills (using The Debt Diet scripts) and trying to modify their heavy-spending ways.  You can find The Debt Diet ($49.95) at jeanchatzky.com. The participants also blog regularly on Credit.com about their experiences with The Debt Diet.

A few years back, with the help of the folks at Roper and Money magazine, I conducted a large-scale study on money and happiness for a book I was writing. The study—which noted that money makes us more miserable than any other factor in our lives—unleashed 10 things you can do to improve your happiness in this area. Among them: Pay your bills as they come in rather than waiting to pay them all once or twice a month. Save at least 5 percent of whatever you’re bringing in (I know for financial reasons you’ll want to save more than that, but for happiness purposes, 5 percent is the trigger.) And set manageable goals.

[Article: A Credit Card Checklist for Natural Disasters]

I was thinking of the latter as I spoke with Debt Dieters Melissa and Erin recently. When you are attempting a lofty challenge—and all of our debt dieters, some of whom started with four figures of debt, some with five figures—you often get a charge right out of the gate. As you’ve been making so little progress for so long, the first few hundred you amass to throw against your formerly stagnant debt, like the first few pounds that roll off the scale feel like a triumph. But unless progress speeds up—and with debt reduction just like weight loss, it rarely does—eventually you take another look at your goal and realize that it still looks really large.

This is the reason that many debt reducers turn to the snowball method of debt reduction (which instructs you to focus on the smallest balances first) rather than the avalanche (which has you focus on the highest interest rate debts first). The avalanche saves you money. But the snowball has the psychological advantage of allowing you to cross things off your list.

[Featured Tool: Get your free Credit Report Card from Credit.com]

Spending more than you must to get out of debt doesn’t make sense to me, so I prefer and advocate the avalanche. But clearly both Melissa and Erin were feeling the need to do some crossing off of their own. For them—and any of you in the same situation—I recommend benchmarks. Break your goals down into mini-goals or benchmarks so that you have something you actually can cross off on a weekly or monthly basis. The benchmarks should be large enough that you feel you’re accomplishing something, but not so large that they incite pressure or feel insurmountable.

An example: I ran a five-mile race last weekend. It wasn’t the longest distance I’d run, but it was my first race in a while and I was apprehensive at the start. The thought of a 45-50 minute run at a speed higher than my regular jog was daunting. So I stopped thinking about the entire distance and started thinking about just the next mile. As each one ticked by I felt a little juiced. And at the three-mile mark, when I could comfortably say I was more than halfway there, I relaxed through to the end. Benchmarks—like goals—make for a happier financial life.

[Featured Product: Monitor your Credit Reports and Scores]

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team