What’s The Fastest Way To Pay Off Debt?


Today we’re gonna talk about [BEEP]. What did I say? [BEEP]
Look I know [BEEP] is technically a four-letter word but how are we ever gonna get out
of [BEEP] if we can’t even say the word [BEEP] …DEBT! Ha! Gotcha! Among the subjects that people like to talk about debt ranks right between
toenail fungus and other people’s dreams your brain just doesn’t want to hear it.
And that emotional reaction is partly why it’s so hard to pay it off. But there’s hope! Researchers have figured out a way to
rewire your brain into taking this monster head-on. Not only can it save
your finances it can teach you a lot about how your brain works
and maybe in the future you won’t have to be afraid of the word [BEEP]. Oh, come on! The average debt holder in America
currently holds about $8,000 in credit card debt over three cards! $26,000 in student loans another $10,000 in car loans. That’s a lot
for one person to manage and they all have different interest rates, terms and
loan balances. In short it’s a bit of a confusing mess. So how do we get started? First things first you’ve got to mind the gap. The gap is
the difference between what you make and spend in a month. Without a gap there’s
no money available to make any kind of progress. The two ways to widen your gap
are more income or less spending. Hopefully it’s a mixture of both. Once
you have a gap to work with it’s time to think of strategy. If you ask a
mathematician how to structure your debt they’d probably recommend something like
the Avalanche approach. You list your debts by interest rates with the highest
at the top and the lowest at the bottom. You pay minimums on everything except
the loan with the highest interest rate which gets the biggest part of your gap.
Once that one’s paid off you use the increased cash flow to move down the
hillside like an avalanche. By the time you get to the bottom you save the most
money because you paid as little interest as possible!
It’s mathematical it’s logical and it doesn’t work very well… The Avalanche approach may be mathematically sound but it omits one
important factor… your brain! Humans aren’t robots or Vulcans they’re
emotional beings. They get discouraged, they get overwhelmed, they have trouble
staying on course. It’s the same reason why those debt consolidation plans can
be a bad idea. It may seem like you’re simplifying your life to put all of your
loans into one big basket but what it really does is create a giant
hulking dead monster that feels so intimidating your brain just gives up. So is there a method that works with your brain’s psychology instead of against it?
Well it turns out… Julia we’re in the middle of something here. I know I was
about to put it down but then I cleared a boss stage and upgraded the frosting
on my cupcake cannon I think I can get to the persimmon palace by bedtime! Turns out the same mind-control techniques found in video games can work with your
finances. Game designers strategically dole out positive reinforcements.
Clearing a board of gems, upgrading your loot which floods your brain with
pleasurable dopamine and keeps you playing. At first these rewards are
handed out easily and often to get you hooked and then more spaced out and
difficult as time goes by. It’s really effective and a little bit evil but the
same brain hacking technique can be used to pay off your debt.
It’s called the “Snowball Method”. Instead of listing your debts by interest rate
we list them by balance. Like the Avalanche approach you pay minimums on
all of them except you focus your firepower on the smallest balance. Once
that’s wiped out you roll the extra cash down the hill to the next highest
balance and so on and so on. The snowball method ensures you easy victories early
on to keep you motivated. Every time you cross a debt off your list
it’s like slaying a beast and upgrading your weapon. Your brain will keep
chasing that dopamine fix even as the levels get more challenging. [MUSIC] While someone using the snowball method
will technically pay more overall interest than someone using the
Avalanche approach that assumes that they’re both going to see it through. But
a study by Northwestern University found that snow ballers were much more likely
to actually stick with the plan and successfully eliminate their debt even
if they owed more money than the Avalanchers. Because they gave
themselves that dopamine edge… Oh, [BEEP]! Julia… Sorry. No matter what method you use the
hardest part of getting out of debt is often just starting. And it can get
lonely because, you know, people don’t like to talk about it. But with
determination and planning you can turn debt into something you don’t want to
think about into something you don’t have to . And that’s our two cents! [MUSIC]

100 thoughts on “What’s The Fastest Way To Pay Off Debt?

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  2. I been doing this since the beginning and why I always narrow down my debt to one or two cards, I never stress over what I owe cause I work the lowest down easy.

  3. I feel you just shouldn’t take so many loans first off. If you can’t afford them all don’t buy them all, take one loan at a time, pay it off as fast as you can, then you can take another. This can save most amount of money and still work with your psychology theory.

  4. “They’re emotional beings”

    You all lost me there. So many of your videos revolve around people being emotional, therefore unable to follow the best logic when it comes to finances. I find that to be utterly confusing and not relatable.

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  7. I regularly talk about debt with my significant other. How much is left, what was paid, which loan to put extra money toward, ect.

  8. I say dont pay down debt if trump and Congress and the us goverment can go trillions in dollars why can't Americas hmm

  9. I've said it before but I freaking love these two! And wow, the production value in this video is off the charts! I know it takes an extraordinary amount of time and effort to make these, but the impact they have on those people you help is immeasurable..

  10. Getting into debt is almost never smart (save maybe a mortgage or a car payment on a 5-year-old car). So if someone has a lot of debt, they were not using intelligent behavior to get into that situation. So it would reason, the road out of debt may also not necessarily be the most intelligent route.

    The avalanche method is by far more intelligent than the snowball method. However, the type of person who would be calculating enough to know this would probably also be smart enough to not get into debt in the first place. For that reason, this ceases to become an exercise in math and merely an exercise in psychology. And for that reason, the snowball method is better.

  11. Off topic but am I the only one who actually enjoys hearing about other people's dreams? I didn't know this was such a taboo topic lol

  12. I have a loan I used to buy my house outright (not mortgage, personal), and car finance used to buy my car brand new (never again).

    The house needs renovating but I’m happy to rough it until I pay the debts first, leaving an avalanche of income to modernise the home.

    I’m glad to know I’m more logical than emotional, as I’m saving to pay the personal loan off first, which is the larger of the two), to get the best early settlement.

    Then paying the car will be be a cakewalk.

  13. What about both ? ¿? One month you do one and the next you do the other. So you're working on the big interested and the small quick reward. You make the quick reward abit less often enough but it still seems to get it to keep you on task.

  14. You could always just use the Avalanche method and not back out of it. Push through with it and you’ll have to pay less. Just don’t give up because it seems tough

  15. Also because it motivates you and it’s fun it causes you to work more and want to cut your budget more thus actually making the snowball better mathematically. Also I can’t believe no one talks about the cash flow aspect. With the snowball it increases your cash flow with having fewer payments faster so you can cover emergencies with cash and not debt during your journey so you won’t get discouraged and also show you hey look I’m paying off debt and when something happened I didn’t rely on debt like before I can take care of it with cash. Just pause your snowball and pay minimums and use the cash flow difference to cover it plus your small EF as Dave Ramsey teaches.

  16. The debt snowball is def the best but I’m surprised they didn’t talk about the debt tsunami method where you pay off your debts in order of their emotional impact. Like if you owe a family member if it’s causes tension and so on depending on one’s situation. So surprised they didn’t.

  17. You are both so awesome for creating this. The tools you are both sharing is empowering. Thank you from the heart!.
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  18. I'm using the avalanche with my student loans.. it works because they actually show the combined interest rate of all loans so I get to see my interest rate go down

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  20. 99% of all people will be in some form of debt in their lives at one time, even self made millionaires have faced goning through some form of debt before they became rich. Only the .5% of people who inherited wealth aka trust fund babies, will never experience debt (unless they blow all their wealth). For the rest of us, it's apart of life. from the time you start working until the time you pay off everything, you will be in debt to something or another. Now how much debt that you'll be in, largely depends on you and the choices that you make in life.

  21. I use this method.

    Buy a small home so you aren't paying rent anymore. Pay as much as you can to pay it off quickly. It's a small 2 bedroom unit so doesn't take long to pay off.

    Use the equity to buy a bigger family home or an investment unit. Either way you have a secondary income to pay the next mortgage. Keep paying as much as you can.

    Just keep this up and then when one is paid off, buy another investment property. Interest on investment properties is tax deductible.

    I have 6 properties now with my wife and I am 34.

  22. Sheesh you guys are creating valuable practical content. And you use pictures and animation for my dumb brain to stay interested. You just earned a new subscriber lol

  23. Do you recommend paying off your mortgage as soon as possible too? For example with a 4% interest rate, I would think your money would be better spent in a mutual fund where you should be able to beat that return.

  24. I’m surprised you didn’t also mention the tsunami method of paying off debt. That is my preferred method, it works really well for me. It is basically listing the debt by what is the most pressing or stressful, no matter the rate or amount owed. I find that the emotional relief is just like what you explained for the snowball, but sometimes a bigger debt is more urgent and goes away faster than a small one, which can feel amazing!

  25. I once had a loan and they took money from my bank account every week until one day they just stopped taking the money with 2k left on the loan…. I’m saying nothing

  26. So, is that basically what I’ve been doing?! The snowball method? I always focus on paying 90% of my credit car (leaving 10 b/c I know I need a tiny bit always, because money companies are scams) then my car I always over pay the monthly and and make minimums on my student loan. 🤭 I focus very heavily on my finances because I don’t have a lot so I’m constantly stressing that I’m doing it right or wrong.

  27. I’m guessing a mixed approach may be good in certain situations. For instance, if your largest balance has very high interest (credit card), it may be good to knock that one out first despite not strictly following the “snowball” method. At the end of the day though, I guess the most important thing is that you pay it off.

  28. Really well done. Love this approach. Unfortunately I can never make enough to not stay consistently 1 month behind on all bills! Hopefully this method will work

  29. You lost me when you put a non-mathematical standpoint ahead of a mathematical one.

    I know people are dump. I'm not going to waste money, just because some studies showed the dump method works better with people.

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  31. It really works! Paid off my credit card today, feeling awesome! Now it's the student loans that are being a giant monster to be managed! Thanks guys!

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  34. First step in getting out of a debt hole is……..STOP DIGGING! Learn to live with less and pay more. Make your lifestyle a little uncomfortable and it will pay dividends.

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