The Debt Snowball Method Explained
See how this proven strategy helps you pay off debt faster and stay motivated throughout your journey.
Step 1: List All Your Debts
Write down all your debts from smallest to largest balance, regardless of interest rate.
What is the Debt Snowball Method?
The debt snowball method is a debt reduction strategy where you pay off debts in order of smallest to largest, gaining momentum as each balance is paid off.
Created by personal finance expert Dave Ramsey, this method focuses on behavior change and quick wins to keep you motivated. While mathematically it may not be the fastest way to pay off debt (compared to the avalanche method which targets high-interest debt first), research shows people are more likely to stick with the snowball method and successfully become debt-free.
The psychological boost from completely eliminating individual debts creates momentum that helps you stay committed to your debt-free journey.
Psychological Wins
Builds motivation through quick wins
Simple to Follow
Easy to understand and implement
Proven Success
Higher completion rates than other methods
Builds Momentum
Each debt paid creates more money for the next
How the Debt Snowball Method Works
Follow these simple steps to implement the debt snowball method and start your journey to financial freedom.
List All Your Debts
Write down all your debts (except your mortgage) from smallest to largest balance, regardless of interest rate.
Make Minimum Payments
Continue making minimum payments on all your debts to avoid late fees and penalties.
Pay Extra on Smallest Debt
Put any extra money toward the smallest debt until it's completely paid off.
Roll Over and Repeat
Once the smallest debt is paid off, add that payment to the next smallest debt, creating a larger payment.
As you pay off each debt, your payment "snowball" grows larger, allowing you to pay off each remaining debt faster than the previous one.
See the Snowball Method in Action
Let's look at a practical example of how the debt snowball method works with real numbers.
Example Scenario
Sarah has four debts and can afford to pay $1,000 total per month toward her debt. Here's how she would apply the debt snowball method:
| Debt | Balance | Min. Payment | Interest Rate |
|---|---|---|---|
| Credit Card A | $1,500 | $50 | 18% |
| Personal Loan | $5,000 | $150 | 10% |
| Credit Card B | $8,000 | $200 | 22% |
| Car Loan | $12,000 | $300 | 7% |
Step 1: Make minimum payments on all debts
Sarah pays the minimum on all debts: $50 + $150 + $200 + $300 = $700
Step 2: Put extra money toward smallest debt
Sarah has $300 extra ($1,000 - $700) to put toward Credit Card A (smallest debt)
Step 3: Pay off first debt and roll over
After paying off Credit Card A, Sarah now has $350 ($50 + $300) to put toward the Personal Loan
Step 4: Continue the snowball
After paying off the Personal Loan, Sarah has $500 ($150 + $350) to put toward Credit Card B
After paying off Credit Card B, Sarah has $700 ($200 + $500) to put toward the Car Loan
Result
By using the debt snowball method, Sarah pays off all her debt in approximately 28 months and saves over $2,000 in interest compared to making only minimum payments.
Benefits of the Debt Snowball Method
The debt snowball method offers several advantages that make it an effective debt repayment strategy.
Psychological Motivation
Quick wins from paying off smaller debts create momentum and motivation to continue your debt-free journey.
Simple to Implement
The straightforward approach makes it easy to follow without complex calculations or strategies.
Visible Progress
Eliminating entire debts provides clear, measurable progress that keeps you engaged in the process.
Snowball vs. Avalanche Method
Understanding the difference between the two most popular debt repayment strategies.
Debt Snowball
Focus: Smallest balance to largest
Advantage: Psychological wins and motivation
Best for: Those who need motivation to stay on track
Research shows: Higher completion rates due to behavioral psychology
Debt Avalanche
Focus: Highest interest rate to lowest
Advantage: Mathematically optimal, saves more money
Best for: Those who are highly disciplined
Research shows: Lower completion rates despite mathematical advantage
Which method is right for you?
While the avalanche method saves more money mathematically, studies show that people are more likely to successfully become debt-free using the snowball method due to the psychological benefits of quick wins. Our platform uses a hybrid approach that optimizes for both psychological motivation and interest savings.