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+# A hybrid approach to getting out debt
+
+You have debt, which is to say a loan that carries a balance and has interest accruing. This interest is working against you as it compounds. More details on that later. For now, we’re going to describe a few ways humans have come up with for paying off debts, followed by describing a hybrid approach, and closing out with an example.
+
+The approaches:
+
+1. The Debt Stacking Method,
+2. The Debt Anxiety Method,
+3. The Debt Avalanche Method,
+4. The Debt Snowball Method, and
+5. The Hybrid Approach to Getting Out of Debt.
+
+Regardless of approach, the first step is to name all financial debts, their payoff balance, interest rate, and minimum payment as of the day you made the list. The second step is to work toward not borrowing money to overcome a gap between income and expenses (this may be hard, and feel downright impossible).
+
+In the immortal words of Inigo Montoya: Begin.
+
+## The Debt Stacking Method
+
+The Debt Stacking Method is less written about than The Debt Avalanche and Snowball Methods (I’m pretty sure I coined “The Debt Anxiety Method”). Further, what I’ve seen written about The Debt Stacking Method makes it seem less like a standalone method, and more like an optional precursor to the others. The question is:
+
+> How much can I pay on a recurring basis?
+
+The crux of this method is determining an amount you can spend on paying debt regardless of other factors. However, minimums are minimums, so I recommend starting there anyway.
+
+1. Add all your minimums together.
+2. If you’re willing and able to pay more, capture how much more. 
+    - If you’re not able to pay more, it’s probably worth contacting the creditors to see if you can reduce your payments, have the debt forgiven, refinance to a lower payment, something else entirely, or some combination thereof.
+
+Combine the total for your minimum payments and the extra you’re able to put toward debt. As you pay off debt, this number shouldn’t change even if the minimum payment for a debt decreases.
+
+Pay the minimum payments on each debt, and pay the extra on one of the debts.
+
+Doing this is what causes your anxiety to reduce, the snowball to grow, and the avalanche to become more fierce.
+
+Choosing which debt to pay is the focus of the other methods.
+
+## The Anxiety Method
+
+The Anxiety Method, despite its name and possible negative connotation, emphasizes your emotional attachment to the debt. The question is:
+
+> How badly do I want to pay it off?
+
+Depending on how you’ve captured the list of debts, you can either rearrange them, or I use dots (or exclamation marks) if I can’t easily rearrange.
+
+I’ll use dots for this description, and from a technical perspective we’re going to do a [bubble sort](https://en.m.wikipedia.org/wiki/Bubble_sort), which does take a minute.
+
+Pick two debts that have no dots next to them (if you’re just starting the first two in your list will do), put a dot next to the *one* of those two you feel more compelled to pay off sooner. Repeat this until you’re left with *one* debt that doesn’t have a dot next to it.
+
+Now, pick two debts with one dot, put another dot next to the *one* you feel more compelled to pay off sooner. Repeat this paragraph until you have only one debt with a single dot.
+
+Repeat this pattern until each debt has a different number of dots next to it from zero dots to the number of debts you have minus one.
+
+The debt with the most dots is the one you are most compelled (anxious) to pay off. The one with the least amount of dots, is the one you are least compelled to pay off.
+
+For the engineering (or mathematically inclined) brains, each round we are eliminating one item from future consideration. So, it looks something like: `n - 1 = x` 
+
+Where “n” is the number of debts under consideration, and “x” becomes “n” for the next round.
+
+The greatest benefit here is you are targeting the debt you have the most negative emotional attachment to.
+
+## The Debt Avalanche Method
+
+The [Debt Avalanche Method](https://www.investopedia.com/terms/d/debt-avalanche.asp) emphasizes the interest rate of the debt. Specifically, we’re emphasizing the highest interest rate. The question is:
+
+> Which debt has the highest interest rate?
+
+Part of the power of this approach, along with the next one is that it’s based on numbers only, not how you feel about it, and the simplicity of its rules of engagement.
+
+Find the debt with a balance greater than zero *and* the highest interest rate. Throw everything you can at that debt while still making minimum payments to the others.
+
+For the mathematically inclined, you will tend to pay less interest than you will picking at random or using The Debt Anxiety or Snowball Methods. However, the drawback is, you may not get the release of emotional distress as quickly or often.
+
+## The Debt Snowball Method 
+
+The [Debt Snowball Method](https://en.m.wikipedia.org/wiki/Debt_snowball_method) emphasizes the payoff balance for the debt. Specifically, we’re emphasizing the lowest balance. The question is:
+
+> Which debt has the lowest balance?
+
+Again, part of the power here is we only care about a single number, only instead of interest rate its payoff balance.
+
+Whatever debt has the lowest balance, put as much money as you can against that debt. When that debt gets paid off, take the minimum (or what you’ve been paying) and add it to the minimum payment for the debt with the lowest balance.
+
+With this approach if you borrow a little against, say, a credit card that was previously paid off, it becomes the first debt you pay off again.
+
+The most marketed feature of this approach is similar to The Anxiety Method. You’re more likely to get a “quick win” and sense of accomplishment by paying a debt off.
+
+## The Hybrid Approach to Getting Out of Debt
+
+As the name suggests, The Hybrid Approach to Getting Out of Debt seeks to maximize the pros while minimizing the cons of the other methods. The question is:
+
+> Can I pay something off today without jeopardizing future payments?
+
+That’s a bit nebulous, here are the concrete steps:
+
+1. Make the list of your debts described in the opening of the article.
+2. Do The Debt Stacking Method by adding all the minimums, and hold on to the remainder.
+    - Note: If you can keep paying the same amount you came up with the first time without heading into financial distress, skip this step in the future.
+3. **Look at your payoff balances and see if you can pay off any of the debts with that remainder.**
+    - If you can pay one off, do so and return to step one.
+    - If not, continue to the next step.
+4. Do The Anxiety Method and only consider the top one to three debts.    
+    - If one of them absolutely stands out for you, pay extra on that one; otherwise, 
+    - continue to the next step.
+5. Sort the one to three debts from the previous step from highest interest rate to lowest (The Avalanche Method).
+    - If the difference between the highest interest debt and the next highest is five percent or more, pay extra on the highest interest debt; otherwise,
+    - continue to the next step.
+6. Using the same one to three debts, find the one with the lowest balance (The Snowball Method) and pay extra on it.
+
+Do this every time you receive money or get an increase in revenue.
+
+Once you pay off all the debts, I recommend continue saving and investing the dollar amount you came up with.
+
+Depending on your situation, it may also make sense to save and invest some money rather than use it to pay down debt. Or it might make sense to reduce total payment amount when a debt gets paid off.
+
+## Example
+
+We’ll pick an example from my own life. I don’t remember the exact numbers at the time, but the payoffs are close. In other words, the accuracy of the example isn’t as important as the illustrative nature of it.
+
+Here’s my list of debts:
+
+1. Federal Student Loan 1: 80,000; 4%; 300 [.United States Dollars](USD)
+2. Federal Student Loan 2: 10,000; 6%; 100 USD
+3. Private Student Loan 1: 10,000; 7%; 200 USD
+4. Private Student Loan 2: 60,000; 6%; 250 USD
+4. Credit Card 1: 25,000; 10%; 250 USD
+5. Credit Card 2: 15,000; 8%; 300 USD
+6. Line of Credit: 500; 10%; 10 USD 
+7. Dad (computer): 600; 0%; 0 USD
+8. Dad (first month’s rent): 400; 0%; 0 USD
+
+Notice the 0 USD minimum payment on the last two?
+
+You may find yourself in this zero minimum payment situation for all sorts of reasons. A promotional thing by the creditor, for example. In these circumstances, I recommend creating a minimum payment for the debt. I usually set it to be two percent of the payoff amount (or credit limit).
+
+Notice the last two also have a zero percent interest rate?
+
+Again, all sorts of reasons this could happen. Often it’s a promotion linked to a balance transfer or opening a new card. As such, the zero percent interest is usually temporary; think 12 months same as cash promotions. I recommend finding out what the estimated interest rate will be when the introductory rate expires, and using that as the percentage.
+
+On with the example!
+
+Let’s isolate (and create) the minimum payments (The Debt Stacking Method):
+
+1. 300 [.United States Dollars](USD)
+2. 100 USD
+3. 200 USD
+4. 250 USD
+4. 250 USD
+5. 300 USD
+6. 10 USD 
+7. 12 USD (calculated)
+8. 8 USD (calculated)
+
+The total is 1430 USD.
+
+Note: This is where the example *really* stops matching reality because when I was actually in this situation I was homeless and did a lot of complex things to make it work.
+
+For the sake of this example, I’m going to say I couldn’t afford to pay anything extra. Therefore, I don’t have enough to pay any of the debts off.
+
+Next we do The Anxiety Method:
+
+1. (8) Line of Credit 
+2. (7) Dad (first month’s rent)
+3. (6) Dad (computer)
+4. (5) Private Student Loan 1
+5. (4) Federal Student Loan 1
+6. (3) Federal Student Loan 2
+7. (2) Private Student Loan 2
+8. (1) Credit Card 1
+9. (0) Credit Card 2
+
+I won’t go too in-depth with why I chose the anxiety levels I did, but I do want to highlight some.
+
+I used the line of credit as a payday loan for myself when I was homeless. A client would pay me, I’d pay the line of credit to reset the due date. Then I’d advance it, and use it to help pay the minimums on other things so I could buy food.
+
+Being financially entangled with individuals makes me nervous. So, that’s why the two dad entries and the private student loan he co-signed for are so high.
+
+The other student loans are higher than the credit cards because they can’t be discharged if I filed for bankruptcy.
+
+We isolate the top three:
+
+1. (8) Line of Credit 
+2. (7) Dad (first month’s rent)
+3. (6) Dad (computer)
+
+Let’s look at interest rates (The Avalanche Method):
+
+1. Line of Credit: 10% 
+2. Dad (computer): 0%
+3. Dad (first month’s rent): 0%
+
+Looks like they’re already sorted from the highest interest rate to the lowest. Further, the difference between the highest interest rate and the next is more than five percent; so, I’ll throw as much money as I can to the line of credit.
+
+Fast forward a bit and I’m to consistently pay off and not borrow against the line of credit. Further, I’ve managed to pay the money I owed my dad. I’m still paying 1,430 USD in total, which means there is extra between the total minimum payments and the total. 
+
+I can’t afford to pay any of the debts off.
+
+I check in with myself using The Debt Anxiety Method, and decide bankruptcy is a low probability. Further, I like having the margin on my credit cards to pay bills and for emergencies, which I can’t do with the student loans because they’re terminal loans, not revolving loans. Finally, I still don’t like being entangled with my dad on one of the student loans. Therefore , my updated Debt Anxiety Method list looks like this:
+
+1. (5) Private Student Loan 1
+2. (4) Credit Card 1
+3. (3) Credit Card 2
+4. (2) Federal Student Loan 1
+5. (1) Federal Student Loan 2
+6. (0) Private Student Loan 2
+
+Top three; none of them stand out as the one to focus on:
+
+1. (5) Private Student Loan 1
+2. (4) Credit Card 1
+3. (3) Credit Card 2
+
+With interest rates (The Avalanche Method):
+
+1. (5) Private Student Loan 1: 7%
+2. (4) Credit Card 1: 10%
+3. (3) Credit Card 2: 8%
+
+The difference in interest rates is less than five percent; so, we’ll finish with The Debt Snowball Method by bringing payoff balances into consideration:
+
+
+1. (5) Private Student Loan 1: 10,000; 7%
+2. (4) Credit Card 1: 25,000; 10%
+3. (3) Credit Card 2: 15,000; 8%
+
+Even though Private Student Loan 1 has the lowest interest rate, it has the highest anxiety score, and lowest balance; therefore, I’ll throw everything I can at it.
+
+Once that’s paid off, I’d probably go after Credit Card 2 because it has a low balance and roughly the same interest rate.
+
+It’s worth noting that sometimes the optimal strategy from a numbers perspective isn’t always the optimal strategy from a mental wellbeing perspective. Further, it may be worthwhile to shift some of the minimum to other saving and investment holdings from a long-term perspective.
+
+The Hybrid Approach to Getting Out of Debt focuses on paying off debt, though. So, if that’s what you want to optimize for, it’s a more holistic approach than any of the other methods on their own.