Debt snowballing is a method of paying off debts one at a time, from smallest to largest, regardless of interest rate.

What is the Debt Snowball Method?

Paying down debt seems straightforward: you borrow, you pay back, you don’t owe anymore. Yet, the average American household owes $137,063 in debt, and that total jumps to about $13 trillion in debt when including all U.S. consumers.

It’s easy to get behind in payments and watch the amount grow overwhelmingly into what looks like an impossible feat. Interest, debt across multiple creditors (e.g., different credit cards, student and car loans, etc.) and the general cost of living life can make you feel like you’re buried in an avalanche.

Fear not: Debt isn’t a death sentence dooming you to a lifetime of ramen while living in your mom’s basement. A simple strategy can help you pay off debt efficiently. Better yet, a strategy can set you up for financial success in the future. Debt snowballing is one such strategy.

What is it?

Debt snowballing is a method of paying off debts one at a time, from smallest to largest, regardless of interest rate. After you pay off the smallest debt, you apply that same amount of payment to the next one, and so forth. The more you can apply in payments, the quicker it goes. The idea is that, as a snowball tends to pick up speed and mass as it rolls, a debtor can create a similar kind of drive to pay off debt sooner.

Celebrate every win, use them to ‘light your fire’

Dave Ramsey, a multi-hyphenate entrepreneur and author of several financial advice books, has made debt snowballing a cornerstone in his business of helping people get out of debt. 

“The debt snowball is the best way to pay down debt because it’s designed to modify behavior,” Ramsey says. “It lights your fire. Quick wins gets you motivated to keep going. Once you get a few quick wins under your belt, you’ve got momentum!”

Keep the ball rolling.

Debt snowballing isn’t as much about speed or efficiency as it is about motivation. In a 2016 study in the Journal of Consumer Research, researchers found that focusing on one debt at a time (instead of paying down multiple debts at the same time) was more motivating to debtors. On top of that, achieving small goals (for example, paying down a smaller debt) was even more motivating. 

On top of that, debt snowballing can tap into that exhilarating feeling of checking off an item from your to-do list. A 2015 study published in the Journal of Marketing Research found that breaking up a large task into a series of smaller tasks gives people a sense of “small victories.” Basically, this boost a person gets from checking off smaller, easier tasks motivates them to tackle the bigger, more difficult tasks (hello massive debt).

It’s like you’re Pac-Man and your debts are dots. Eat one dot at a time until they’re all gone, then get to the next level (and avoid the ghosts).

How does it work? Sign me up.

The good news is, it doesn’t matter how heavy your debt may be, anyone can use debt snowballing.

“But it takes hard work and discipline, because you must change behavior,” Ramsey says. “Personal finance is 80 percent behavior and 20 percent head knowledge.” 

To get the snowball rolling, he suggests the following steps:

  1. List all your debts from smallest to largest (if you own a home, don’t include that).
  2. Make minimum payments on everything but the smallest debt. Attack that smallest debt with a vengeance. It will help to have a monthly budget as well, so you can see where all your dollars are going (and maybe if you can get them back).
  3. Every extra dollar you can squeeze out of your budget goes toward that smallest debt until it’s (poof!) gone. 
  4. Then take the payment from that debt, plus the extra money you’ll find in your budget and throw it at the next debt. Say you paid $100 a month toward your smallest debt and now it’s gone. Add that $100 per month to the payments of your next debt. If you’ve got more to spare, add that too.
  5. Rinse and repeat until all your debts are paid.

Is it right for me right now?

Debt snowballing will work, but just like anything else with finance, it really depends on your current situation.

“Some people eliminate debt faster than others, but everyone who sticks with it will get rid of debt,” Ramsey says.

Debt snowballing is just one of many strategies for paying off debt. So, it’s totally worth asking yourself if plowing through your debt is the best strategy for you. Are you more concerned with paying the least amount of interest possible? Or are you more concerned with building up savings first?

Bottom line: A strategy, such as this one, will let you wholly understand your finances and make the best decisions for you in the long run.

Want some other strategies for paying down credit card debt? We’ve got you.

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