What is the Debt Snowball?

debt snowball

The debt snow what?

The debt snowball is a method of paying off debt primarily made famous by Dave Ramsey. In short, this method requires you to list your debts in order from smallest to largest and tackle the smallest debt first with as much money as your can each month. Regardless of interest rate. This means that you’re still paying your normal monthly payments on your other debts while focusing all of your efforts on that smallest, first debt. Once you kill the first debt, you move onto the next smallest debt. This time, you take the original payment your were paying on the first debt and add it to the monthly payment of the next debt. Check out the example below to help this make sense.

Show me an example!

This method isn’t the ‘fastest’?

If you did the math on this, kudos to you. You’re absolutely correct. While this may not be the most mathematically correct way to pay off debt as fast as possible, it is the best way to keep you on track to becoming debt free. The caveat to using the debt snowball is that you see yourself paying off debt faster and faster the longer you go. Hence the name. It is more mentally encouraging to see yourself killing small pieces of debt than it is to slowly drag out paying down your highest interest rate loans.

What if I want the quickest way possible?

Now, if you are laser focused, mentally strong and highly disciplined, the method for you might be the debt avalanche. I will go into detail about that method in my next finance post. Heads up though, this method isn’t for everyone. It’s a lot more satisfying seeing yourself knocking out debts early on.

debt snowball

Until then, keep working on that debt!

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About the author

Amateur blogger, avid gym goer, full time nerd and Owner of ALB. All thoughts are my own and they're amazing.

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