Glossary
Avalanche method
The avalanche method is a debt payoff strategy where you pay extra toward the highest interest rate first while making minimum payments on every other debt. It usually minimizes total interest, but progress can feel slower if the highest-rate balance is large.
The avalanche method sorts debts by annual percentage rate, not balance size. After minimum payments are covered, every extra dollar goes to the debt with the highest interest rate. When that debt is gone, the extra payment moves to the next highest rate until the list is paid off.
This method is usually the mathematically efficient path because high-rate debt grows faster. It is especially useful for credit cards, personal loans, or other balances where interest charges are a major drag on monthly progress. The challenge is that the first target may be large, so the visible payoff milestone can take longer than with the snowball method.
A strong avalanche plan should still account for real payment due dates, emergency savings, and category spending. Paying off debt faster is valuable, but not if every unexpected expense pushes the household back into revolving balances.
Use this in Nethaven
This term connects directly to how people review money in the app. See debt payoff calculator for the related workflow.
Explore Debt payoff calculatorRelated terms
Snowball method
The snowball method is a debt payoff strategy where you pay extra toward the smallest balance first while making minimum payments on the rest. When that debt is gone, its payment rolls into the next smallest balance, creating visible wins and momentum.
Cash flow
Cash flow is the movement of money into and out of your accounts over a period of time. Positive cash flow means income exceeded spending; negative cash flow means spending, debt payments, transfers, or investments exceeded incoming money.
Expense ratio
An expense ratio is the annual cost of owning a mutual fund or ETF, shown as a percentage of invested assets. A 0.20% expense ratio costs about two dollars per year for every thousand dollars invested, before market gains or losses.