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A Snowball's Chance: Debt Snowball Vs. Debt Avalanche, Evan Mcallister
A Snowball's Chance: Debt Snowball Vs. Debt Avalanche, Evan Mcallister
Senior Honors Projects, 2010-2019
Traditional mathematical analysis states that the most efficient way to pay off interest-bearing consumer debt is to pay the individual debts in order from largest to smallest interest rate. In doing this, the debtor will eliminate the largest sources of interest first, thus shortening the overall time-to-pay. This method is known as the “Debt Avalanche.” The “Debt Snowball” method, popularized in large part by investor-author David Ramsey, recommends that consumers pay debts in order from smallest to largest, regardless of interest rate. In this paper, I conduct an empirical analysis of the Federal Reserve’s Survey of Consumer Finance (SCF), calculating …