Debt Management Guest Post

Is Debt Snowball An Effective Debt Reduction Strategy

This is a guest post by David Brown, a content writer with Oak view law group. He writes on a variety of finance related topics with a strong focus on debt.

Are you submerged in debt and desperately looking for a way out of the debtors prison? Well, it is certainly possible for you to get out of the red zone without filing bankruptcy or consolidating your debt. The modern era we live in offers far too many strategies to combat debt. One of the better known approaches to eliminate debt is debt snowball. Can this approach really lead you to a debt free destination? Let’s discuss.

What is debt snowball?

The concept of debt snowball has been popularized by financial guru Dave Ramsey. Debt snowball is a process by which you list all your debts from lowest to highest and attack the lowest debt first. You need to pay minimums on each bill except for the lowest one. Pay as much as you can towards the lowest debt so that you can get rid of it as soon as possible. Next, you move on to the second lowest debt and the process continues till you are free from the rib crushing, spine tingling clutches of debt.

What are the advantages of debt snowball?

“Personal finance”, Dave Ramsey correctly points out, “is 20% head knowledge and 80% behavior”. Debt snowfall is based on this view. It rightly assumes that paying off smaller debts gives a sense of victory which motivates people to pay off all other debts.

It is relatively easy to pay off bigger debts using debt snowball method. Here you clear the smaller debts first. So by the time you reach the bigger debts, the extra amount that you can pay towards them increases. Consequently, it is possible to eliminate them quicker.

Another advantage of debt snowball method is the reduction of the total amount owed to creditors in a single month. This can save your neck in case you encounter an unforeseen situation like loss of job or medical emergency.

Debt snowball has often been compared with debt avalanche theory by which you try to eliminate the debt with the highest rate of interest first. This approach is mathematically better than debt snowball as you have to pay the least amount of interest. Nonetheless, the debt with highest interest rate can also be the one with the highest balance. This means it will take a long time to pay it off which can have a psychological impact on you. It is highly possible that you will try to get rid of it for several months only to give up because of a feeling that you are getting nowhere. This is where debt snowball scores over debt avalanche. The “quick wins” you get with the former, gives you hope-something very important, sometimes more important than money.

Some criticisms against debt snowball

It has been pointed out that by emphasizing on human psychology, debt snowball puts mind over matter which can result in monetary loss. As you focus on the debt with smallest balance instead of the one with highest interest rate, you have to pay more money in the long run. Thus, your “motivation” comes at the cost of some extra bucks.

Secondly, debt snowball does not take into account the difference between secured and unsecured debt. Problems often follow if secured debts are not addressed at an initial stage- foreclosures and repossessions being at the worst end of the spectrum.

Is debt snowball the right choice for you?

Debt snowball is a simple debt reduction method which is suitable for people who have a wide range of balances. It gives you tangible results and motivation which is missing from other similar approaches. While is it most effective for people who need some encouragement in the form of quick results, individuals with a lot of patience will benefit more with avalanche approach because it is cheaper.

Debt snowball can certainly help you to climb up from the trenches. However, you should remember that it cannot make you debt free with the wave of a wand. But if you stick to it till the end then your patience will be certainly rewarded.

Comments (6)

  • Thanks for the post, David. It’s funny how passionate people can get about which method is best for paying off debt. If the endgame is to be debt free, who really cares how it’s done, right?

    I lean toward the Dave Ramsey-style of debt snowball – going from smallest balance to largest – simply because so many of the folks I encounter have to make the behavioral change with their money in order to achieve what they desire. That means they need quick affirmation that they can make progress.

    On the flip side, though, I’ve also met a ton of people who have been saddled with debt unexpectedly (like a distribution in a divorce). They are disciplined and desire to dump the debt rapidly. For them, the interest rate snowball approach (highest rate to lowest) is best.

    When we’re really honest with ourselves about what motivates us, we can make progress with either method.

    Thanks for the post!

    • I agree, if you make the commitment to get rid of your debt it doesn’t matter the way you do it.

  • Funny how broke people with tons of debt and no money will argue and challenge Dave Ramsey’s plan and say he is wrong.

    The debt snowball works if done over time. It’s not a quick fix or easy button. And it takes hard work. That fact alone leaves many people out- they are not willing to do what it takes to become debt free.

    • very true. You have to try in order to see results. If you don’t, then you’re just assuming and we all know what that does

  • Hello, I’ve followed you on Twitter for a while and enjoy all of articles, but this is my first time commenting.

    You’ve given a very astute observation of the benefits and drawbacks to the debt snowball. I was of course familiar with the opposite method of paying the highest interest rate debt off first, but had not heard the title Debt Avalanche before. I guess when you add the variations of’s Debt Tsunami and’s Snowflaking you have enough debt disasters to fill a Hollywood blockbuster. :)

    I’m just getting started in the PF blogosphere and did a post last week on Debt Snowballs. I’d love to get your criticism if you have a moment.

    David Galloway

  • Nice job of outlining the pluses and minuses of the 2 theories about becoming debt-free. Personally, I used the avalanche theory on my own debt. I took special satisfaction in knowing that I was saving myself as much money as I possibly could. Thanks for the good article.


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