Avalanche method (repayment priority)
DebtsThe avalanche method is the mathematically optimal strategy for paying off debt: repay the debt with the highest interest rate first, while paying only the minimum installment on all others.
When debt takes priority over investing: if the loan interest (e.g. 7% consumer loan) is above the expected portfolio return (e.g. 6% ETF return), repayment is the better "investment". Every euro of debt paid off saves a guaranteed 7% interest – better than a hypothetical 6% return.
Example:Loan A: €10,000 at 8% → priority 1 (repay!) · Loan B: €5,000 at 3% → priority 2 (minimum installment, invest the rest)
Snowball method (alternative):Start with the debt that has the smallest remaining balance instead of the highest interest rate. Mathematically suboptimal, but psychologically more motivating thanks to quick "wins".