ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

The Debt Snowball Method: How It Works

Updated on June 3, 2010

The "debt snowball" method was brought to life by personal finance expert, Dave Ramsey, as a means of encouraging debt-ridden individuals to be inspired to tackle their debts rather than burying their head in the sand because the task looks too daunting. If you're not already familiar with the concept of the "debt snowball" method, here's what you need to know about it.

The Basics

There are two differing strands to the "debt snowball" plan. If you're following the plan advocated by Dave Ramsey, the idea is that you tackle the smallest debt first and get this one paid off first to give you some momentum to take forward into breaking down larger debts.

This goes against the common belief that you should single out the debts with the largest interest rates to cut how much interest you'll ultimately pay. This "debt snowball" approach is supported by the Motley Fool.

While you're busy tackling one particular debt, you still need to meet the minimum payments on your other debts. Once you've successfully paid off a debt, you can take the minimum payments from that and add this to what you're paying on your prioritized debt to get it paid off quicker. The idea is that you're never decreasing your debt payments, despite the fact that debts are being paid off, so that you're getting the whole lot paid off in the shortest time frame.

If you're not sure how the "debt snowball" plan would work for your debt situation, you can plug your particular numbers into the "snowball calculator" to get a better idea.

The Advantages

Tackling the smaller debts first gives a sense of achievement and this can spur you on. Dealing with bigger debts may sound more sensible on paper, but many people lose interest and enthusiasm if they can't see any real progress being made and this can mean that it isn't so beneficial in the long run. Putting all of your effort into paying off one debt at a time means that you'll see definite progress as each debt is whittled down and eventually paid off altogether.

If you prefer to tackle higher interest debts first, you can significantly cut how much interest you'll be paying over the life of the debt and this can mean that there isn't going to be massive interest piled on top of the debt to prolong it. 

The Disadvantages

Assuming that your smaller debts aren't also the ones with the highest interest, your other debts will be racking up interest while you're concentrating your efforts elsewhere so this is something to think about if you follow Dave Ramsey's take on the plan.

Comments

    0 of 8192 characters used
    Post Comment

    • Hello, hello, profile image

      Hello, hello, 

      8 years ago from London, UK

      Very good advice and I needed it. Thankyou

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)