Debt Snowball Method
Definition
A debt repayment strategy where you pay off debts from smallest balance to largest, regardless of interest rate, gaining psychological momentum with each eliminated debt.
The debt snowball method, popularized by Dave Ramsey, is a debt payoff strategy based on behavioral psychology rather than pure mathematics. You list all debts from smallest balance to largest, make minimum payments on everything, and throw all extra money at the smallest debt until it's paid off. Then you roll that payment into the next smallest debt.
The snowball analogy is apt: as each small debt is eliminated, the monthly payment you were making on it gets added to the payment on the next debt. Your monthly debt payment "snowballs" larger and larger as you eliminate each balance, accelerating the payoff of larger debts.
Mathematically, the debt avalanche method (paying highest interest rate first) saves more money in total interest paid. The snowball method may cost slightly more in interest, but studies show it has higher completion rates because the psychological wins of eliminating debts quickly provide motivation to continue.
The debt snowball is most effective when you have multiple debts of varying sizes and need motivational wins to stay committed. If you have a $500 medical bill, a $2,000 credit card, and a $15,000 car loan, quickly eliminating the $500 bill creates a sense of progress that pure math doesn't capture.
Some financial advisors recommend a hybrid approach: use the snowball for most debts, but if one debt has an extremely high interest rate (like a 29% credit card), prioritize that regardless of balance. The best debt payoff strategy is the one you'll actually follow through on.
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Frequently Asked Questions
Is the debt snowball or debt avalanche better?
The debt avalanche saves more money on interest, while the debt snowball provides quicker psychological wins. Research suggests the snowball method has higher completion rates because motivation matters more than optimization. Choose the method you'll stick with.
Should I include my mortgage in the debt snowball?
Most financial advisors exclude the mortgage from the debt snowball and focus on consumer debts (credit cards, car loans, student loans, medical bills). Once all consumer debt is eliminated, you can optionally add extra mortgage payments as a separate goal.