Debt Snowball

Debt Snowball

It’s irresistable: When you’re freeing yourself from debt, make sure to earn some easy victories first.

That’s the idea behind the debt snowball–a technique, popularized by Dave Ramsey, to pay off your debts with the lowest balance first… and not to tackle the debts with the highest interest first.

Ramsey’s idea is simple: By giving ourselves victories early on, we encourage ourselves to work our ways out of debt. Wiping small debts off the slate first primes us to stay on the winning path.

Here’s the way the debt snowball works:

  1. Order your debts from lowest to highest balance.
  2. Put a certain amount of money towards repaying debts each month. Don’t spend that money on anything else.
  3. Pay the minimum payment for all debts except the debt that has the lowest balance.
  4. Spend every other single free dollar you have on the debt that has the lowest balance.
  5. Celebrate paying off your lowest balance debt.
  6. Repeat for the next-lowest balance debt, and so on.

The debt snowball isn’t for everyone. After all, there’s one simple, glaring flaw with the debt snowball: You end up repaying more money.

Because you’re focusing your money on paying off your low balance debts rather than your high interest debts, you’re losing more money over time than you would otherwise.

But the debt snowball makes you feel so damn good psychologically. Here’s Ramsey explaining the debt snowball:

Want to get started freeing yourself from debt with the debt snowball? Here’s a handy Debt Snowball Caclulator.