Using a debt snowball to work your way out of debt is an idea that has become increasingly popular over the past few years. In fact, with the explosion of Dave Ramsey’s financial principles, as disclosed in his Total Money Makeover, the phrase “debt snowball” has become a regular part of many families’ financial conversations. What you may be wondering, though, is whether or not the debt snowball will work for you.
Let’s discuss, first, what the debt snowball is. The idea behind the debt snowball is simple. Begin by listing each of your debts on one piece of paper. List your largest debt first and keep going until you’ve worked your way to your smallest debt. Some families post their list on their fridge or on their desk so that they see it regularly. I’ve known other people who keep it in their wallet so that they think about it every time they consider making a purchase.
Once you’ve listed all of your debts, you’re ready to start your debt snow ball rolling. Each month you gather as much money as you can to put toward paying off your debts. You pay the minimum payment on all of your debts and then put everything else you can scrape together towards the smallest of your debts.
As soon as you pay off that smallest debt, you should draw a big line through that entry on your debt list. Then, take the money that you are no longer sending to that vendor and send it to your smallest remaining debt. You continue on this path until all of your debts are paid off. During this time you also add any unexpected windfalls to your debt payments.
Sounds easy, doesn’t it? That’s why the debt snowball works for so many people. It’s not complicated; anyone can do it. It’s a simple plan that helps you work your way out of debt.
Getting back to your question about whether or not the debt snowball will work for you, I have to answer a confident, “Yes!” I believe the debt snowball can work for anyone. Besides being easy, this plan is designed to keep you motivated. People get so excited as they move closer to crossing their next debt off on the list that they find the will to continue making sacrifices for their goal. Some even start selling things or working extra hours to speed their progress.
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Like anything else, having a plan works, and the motivation comes after to keep it going on.
Great post and it is true. I would like to take on this strategy and see what happens.
My Well Of wealth
I would really question this strategy. To me, it is taking a “psychological” approach to the problem rather than a “logical” approach. If I understand it correctly, you are not taking into account the interest rates associated with each debt. Sure, you will be able to gain more motivation using this method, because you can cross debts off of the list faster. However, it will cost you more money in interest in the long run if you’re larger debts carry higher interest rates.
Trust me, I was as bad in debt as anybody out there, but when I got serious about it, I organized my debt according to the interest rate associated with each debt, rather than their size.