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How to pay down debts with your spouse

Updated: Nov 28, 2023

Updated post: 8/15/23 - Original post: 8/21/22


How to Budget When Your Spouse Won't: Part 9 of our 10 part budgeting series


Click the interactive image above for a graphic explanation of the snowball and avalanche methods.


The Avalanche Method


When applying the avalanche debt repayment method, you first pay the highest interest rate loans. Once that loan is paid off, you put that money toward the account with the next highest interest rate until you are done. Then you repeat the process.


Positive

If you can stick to it, this method is the fastest way to pay off your loans and save you the most money.


Negative

If the highest interest rate loan has a high balance, the process can feel discouraging if that first loan isn't repaid quickly.


Example

You want to pay down your debt faster than the minimum monthly payments.


Here is a list of your monthly debt payments: A. Credit card balance of $400 at 12% APR

B. Payday loan balance of $500 at 300% APR

C. Mortgage balance of $246,000 at 4%

Here is the order you would pay these debts off:

1. Payday loan balance of $500 at 300% APR

2. Credit card balance of $400 at 12% APR

3. Mortgage balance of $246,000 at 4%


The Snowball Method


When applying the snowball debt repayment method, you first pay off the loan with the smallest balance. Once that debt is paid, you take the money you were putting toward that payment and roll it onto the next-smallest debt owed.


Positive

Paying off the loan with the smallest balance first is the fastest way to eliminate your first debt and can provide a psychological boost to keep you motivated.


Negative

This method is the slowest way to pay off your loans and will cost you the most.


Example

You want to pay down your debt faster than the minimum monthly payments.


Here is a list of your monthly debt payments:

A. Credit card balance of $400 at 12% APR

B. Payday loan balance of $500 at 300% APR

C. Mortgage balance of $246,000 at 4%


Here is the order you would pay these debts off:

1. Credit card balance of $400 at 12% APR

2. Payday loan balance of $500 at 300% APR

3. Mortgage balance of $246,000 at 4%

 

Your financial life in a spreadsheet, automatically updated daily. Build your budget, now.

 

Updated: The Hybrid Method


First apply the snowball method, paying off the loan with the smallest balance. After gaining the confidence you need to see the plan through, switch to the avalanche method.


You'll have the best of both worlds, the psychological boost of paying off a debt and then the most mathematically effective approach to tackling your debts.

 

When you plan a budget with your spouse, you are not budgeting with Excel or other tools such as our Budget Template for Couples. You are using these tools. You are budgeting with someone you love and share your life with.


Our free Budget Template for Couples is designed specifically for couples. Each category includes linked graphic-centric short videos to help couples in the budgeting process, providing essential prompts to consider budgeting each categorically appropriately.


This 10-part series is dedicated to helping you work with a spouse to budget together and provide the information you need to make educated decisions with your dollars.


 

Learn More


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For engaged and recently married couples who want to manage money and the home as a team.


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Winning ideas from experts to manage money and the home as a team. 2023 Plutus Award Finalist: Best Couples or Family Content


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Winning ideas to manage money and the home as a team delivered to your inbox every two weeks. You'll even receive a few free gifts!


Modern Husbands Monthly Newsletter (engaged and newlyweds)

Everything you need to know about transitioning to marriage. The first gift you will receive is a guide to tackle the seven most asked questions about budgeting as a couple.

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