Intro
April: You’re listening to the Money Dad Podcast — practical financial and business conversation from a dad who knows money. I’m April Adams, and please welcome my dad, the Money Dad, Robert Adams.

Robert: Good morning, April.

April: It may not be morning whenever other people are listening…

Robert: Well, it’s morning right now and I can feel it.

April: I’m good — and I thought we’d start with a question from the website because it ties in with what we’re talking about today. We can roll into it… or maybe, intentionally punning here, snowball into it.

Robert: That sounds good. Let’s snowball into it, baby.

Listener Question: The Debt Snowball

April: We heard from Paige, who says she’s doing her homework and preparing for the next episode. She’d be interested in hearing your thoughts on the snowball method to pay off debt. Do you agree with that method, or do you suggest doing something else?

Robert: Before we answer the question directly, let’s talk about debt itself.

How did you get there?

Most people end up in debt because of:

• Impulse buying

• Trying to live like other people

• Not paying attention to what they’re spending money on

• And of course, student loans

April: And student loans.

Robert: Right — student loans aren’t always negligence. But they pile on top of everything else.

One thing I want people to start doing as we move toward the snowball method is this: when you buy something, get in the habit of evaluating that purchase.

Ask:

1. Is it necessary? Can I do without it?

2. Does it depreciate quickly?

3. What does it cost to maintain or upkeep this thing?

People rarely factor in ongoing costs.

I heard a guy on the radio who bought a $53,000 truck. His payment was $853 a month, and he wondered why he was always short $400 a month. He “didn’t know what to do.”

To me, that’s simple: sell the $53,000 truck and buy something cheaper. Problem solved.

I’m talking about this now so people will think about the consequences before they make big decisions.

The Big Picture: Why We’re Doing This

All our earlier episodes (1, 2, 3) have gone way back to the basics:

• Figuring out where you are

• Tracking what you spend

• Setting up a budget

But there are also people listening who already have money and are asking, “Now what do I do with it?”

As we move forward, we’ll get to that: how to grow money, invest, retire well, and use principles like the 4% rule.

For example, a common retirement guideline is:

• If you have $1 million, you can withdraw 4% a year → $40,000 annually, likely without touching the principal.

• If you need $80,000 a year, you’d want $2 million saved to stick to that 4% rule.

The whole big-picture purpose of this podcast is to help people:

• Get out of being slaves to debt

• Move into a place where they can build wealth

Financial Bondage: What Debt Really Does

When you make certain financial decisions, you can put yourself in bondage.

In the old days, if a man couldn’t pay his debts, he was thrown into debtor’s prison, and his family belonged to the lender. Today, we don’t have physical debtor’s prison — but we do have:

• Financial bondage

• Mental bondage

• Constant worry

Thousands of families are destroyed every year by financial stress. When you’re drowning in debt, you’re not really living — you’re just reacting to bills and collectors.

So when we answer Paige’s question, we’re really talking about:

“How do we get out of this jail we put ourselves in?”

Most of the time, we ended up there by violating basic principles we’ve already talked about in earlier episodes.

So… What IS the Snowball Method?

Robert: Okay, Paige — now to your question.

The snowball method is a debt payoff strategy where you:

• Pay off debts from smallest balance to largest balance,

• Ignoring the interest rate.

Here’s how it works:

1. List all your debts from smallest to largest balance.

2. Write down the minimum payment for each.

3. Pay the minimum on all debts except the smallest.

4. Throw every extra dollar you can at the smallest debt until it’s paid off.

5. Once it’s gone, take that payment amount (plus the extra you were paying) and roll it onto the next smallest debt.

6. Repeat until all debts are paid off.

It’s called the snowball method because you’re building momentum:

• You knock out a small one → victory

• That motivates you to attack the next one → bigger snowball

April: So it sounds like an encouraging process.

Robert: It is. A lot of problems with money and insecurity come from a lack of confidence.

The snowball method gives you quick wins:

• You pay off a debt → you feel successful

• You want to keep going

That emotional boost is why many people love the snowball method.

But What About Interest Rates?

April: You mentioned interest rates. So is this method really the one that saves the most money?

Robert: Probably not.

Mathematically, the snowball method usually does not save the most money in interest. But it does help people stay motivated.

In many cases, I’d suggest you attack credit card debt first, especially high-interest cards, no matter where they sit in the snowball order.

We’ll talk in the next episode about how to find extra money to pay down debts (and build an emergency fund). For now, we’re focusing on debt methods and answering Paige’s question.

Should You Build an Emergency Fund While Paying Off Debt?

April: We were going to talk about emergency funds too. Do we build an emergency fund while paying off debt?

Robert: If you can afford it, yes.

Once you build your budget, it will show you quickly if you’re in the plus or minus:

• If you’re in the minus, you can’t build much yet — you’ve got to fix that first.

• Once you’re in the plus, you can start deciding how much goes to debt payoff and how much to emergency savings.

We’ll get into that more in future episodes.

The Avalanche Method

The snowball method is good — but it’s not the only way.

Another method is called the avalanche method.

Where:

• Snowball focuses on smallest balances first,

• Avalanche focuses on highest interest rates first, regardless of balance size.

The avalanche method:

• Usually saves more money in interest,

• Often pays off debt faster,

• Requires more discipline, because you don’t always get that quick small-win payoff.

How to do the Avalanche Method:

1. List all your debts and their interest rates.

2. Make the minimum payment on all debts.

3. Throw all extra money at the debt with the highest interest rate.

4. When that’s paid off, roll that payment into the next-highest interest rate debt.

5. Repeat until all debts are gone.

Example:

• $3,000 credit card at 22%

• $5,000 credit card at 15%

• $800 credit card at 6%

Snowball says:

• Pay off the $800 first (smallest balance), then the $3,000, then the $5,000.

Avalanche says:

• Pay off the $3,000 at 22% first, because it’s costing you the most in interest. Then the 15%, then the 6%.

Avalanche is usually:

• Mathematically better

• Economically smarter over time

Snowball is usually:

• Emotionally easier

• More motivating early on

Debt Consolidation: The “Bad Word” That Sometimes Helps

Some financial teachers say never do debt consolidation.

I disagree — sometimes it’s appropriate.

There were times earlier in my life when:

• I had multiple debts,

• I didn’t have the cash flow to realistically attack them separately using snowball or avalanche,

• I had to find a way just to make the payments and not drown.

That’s where debt consolidation can come in.

Debt consolidation:

• Combines multiple debts into one payment, sometimes with a better interest rate.

• Can simplify your monthly payments.

• May reduce interest and lower your monthly total, depending on the terms.

For some people, having 8–10 separate payments is overwhelming. They can’t keep up mentally, even with good methods. Consolidating into one payment:

• Reduces overwhelm

• Keeps them from missing payments

• Makes it easier to focus

Is consolidation always the best? No.
Can it be the right move sometimes? Yes.

Which Method Is Best?

Robert: In my opinion:

• If you want the fastest, cheapest, most mathematically efficient solution → Avalanche Method.

• If you need emotional momentum and quick wins to stay motivated → Snowball Method.

• If your interest rates are extremely high across the board and your payments are overwhelming → Debt Consolidation might beat both.

There’s no one right answer for everyone. You have to consider:

• Interest rates

• Payment amounts

• Terms

• Your personality, discipline level, and emotional needs

Sometimes a hybrid of these methods works best.

Want Help Evaluating Your Situation?

Robert: If you’d like us to look at your specific situation, you can go to our website:

TheMoneyDadPodcast.com

If you’re willing to share:

• The debts you owe

• Interest rates

• Minimum payments

Send that in. We’ll take a look and give you our opinion.

April: And just like we’ve said before, this is educational, not professional financial advice. You can take it or leave it, but these are approaches that have worked for Dad personally and for people he’s helped over the years.

Looking Ahead: From Paying Debt to Building Wealth

Robert: Ultimately, we want to get you to a point where:

• You’re out of debt,

• You’ve built an emergency fund,

• You can save and invest — 401(k)s, IRAs, and other tools —

• You’re storing up for the future.

There’s an old proverb that says:

“The wise have wealth and luxury, but fools spend whatever they get.”

Don’t be the person who thinks money will burn a hole in their pocket so they have to spend it as soon as it hits the account.

Change the attitude from:

“I have money — what can I buy?”

To:

“I have money — how can I steward it well?”

Snowball, avalanche, consolidation — whichever method you use, it all comes back to:

• Your attitude

• Your discipline

• Your willingness to change

Closing

April: If you want us to look at your situation or you have a question like Paige did, you can use the form right on the homepage at TheMoneyDadPodcast.com.

We’re shaping some of these episodes around your questions.

Robert: The whole purpose of starting this podcast is to share things that might help you live a better financial life. Your questions and comments help us help you.

April: Thanks for listening to the Money Dad Podcast. Head over to TheMoneyDadPodcast.com for more resources and to send in any questions you might have.
Do your homework — and we’ll see you next time.