How the Snowball Method Works
The psychology behind Dave Ramsey's proven debt payoff strategy
The Snowball Method is a debt payoff strategy popularized by Dave Ramsey where you pay off your debts in order of smallest to largest debt balance, instead of interest rate. As each debt is paid off, you roll the payment amount into the next debt.
Why This Method Works:
- Builds momentum and motivation
- Provides quick wins to stay encouraged
- Simplifies your debt payoff strategy
- More money back in your pocket each month
- Helps you stay focused on one goal at a time
The 4-Step Process
Follow these steps to implement the snowball method
List All Your Debts
Start by listing all your debts from smallest to largest balance, regardless of interest rate.
Pay Minimums on All Debts
Continue making minimum payments on all your debts to avoid late fees and penalties.
Attack the Smallest Debt
Put every extra dollar toward your smallest debt until it's completely paid off.
Roll Over Payments
Once a debt is paid off, take that payment amount and add it to the next smallest debt.
Traditional Debt Payoff vs Snowball Method
See how your focus changes your momentum and your payoff timeline
Traditional: Smallest Debt Balance First
Focus extra payments on the largest interest rate first.
$500/ month extra payment
| Order | Debt | Balance | Rate % | Min. Payment |
|---|---|---|---|---|
| 1 | Credit Card | $20,000 | 26% | $250 |
| 2 | Store Card | $1,200 | 15% | $45 |
| 3 | Personal Loan | $10,000 | 8% | $500 |
| 4 | Car Loan | $30,000 | 6% | $650 |
| 5 | Medical Bill | $3,500 | 0% | $150 |
Snowball: Smallest Minimum Payment First
Focus extra payments on the smallest balance first, then roll that minimum payment amount forward.
$500/ month extra payment + Freed min. payments
| Order | Debt | Balance | Rate % | Min. Payment |
|---|---|---|---|---|
| 1 | Store Card | $1,200 | 15% | $45 |
| 2 | Medical Bill | $3,500 | 0% | $150 |
| 3 | Credit Card | $20,000 | 26% | $250 |
| 4 | Personal Loan | $10,000 | 8% | $500 |
| 5 | Car Loan | $30,000 | 6% | $650 |