Get Out Of Debt With The Debt Snowball Method

Creating a debt snowball is my preferred method of getting out of debt.

The strength of using this method is that it focuses on the behavioral side of personal finance rather than the mathematical.

Since we are not robots that always do exactly what we know we should, I recommend this method for most people.

These are the simple steps to snowball your debt

  1. Create a list of all of your debts: credit cards, car loans, student loans, mortgages, etc…
  2. Next to each one write down the total balance owed.
  3. Re-order these from smallest to largest debts (use Excel or Google Docs to make this simpler.)
  4. Pay the minimum payment on all of the debts – except the smallest one.
  5. Put every extra dollar you can find towards paying off that smallest debt.
  6. Celebrate like crazy when you get that first debt paid off.
  7. Take the amount you were paying towards the first debt and put towards the next smallest debt. Do this until this one is paid off.
  8. Celebrate again!
  9. Continue this process until each one is paid off.

What you will find is that each time you pay off a debt, the “snowball” gets larger. Since you are taking the amount you used to pay off the first debt and putting it all + the minimum payment that you were already paying to the second together, you are making more of an impact towards that debt. Each time you pay off a debt, the snowball gets larger and more powerful – which is great, because it just increases the speed that each debt gets paid off.

The numbers don’t lie

calculator If you are like most logical people out there (like me 🙂 ) you are probably saying, “you could save more money by paying the highest interest rate cards off first.” You are right – calculators do not lie and they will give you the correct logical answer. Paying your credits cards off starting with the highest interest rate to the lowest is “mathematically” the best idea. But, let’s look it at from another angle:

If we DID what we knew we SHOULD do 100% of the time, using the mathematical approach would be best. But, we are emotional beings and even the most disciplined among us still have emotions and are affected by them.

Computers use logic 100% of the time. Humans do not. We were not created to. We make decisions based on our emotions. We get let down, we get encouraged, we feel motivated, we get scared, we feel hopeful, we feel like quitting. These are all emotional states that each one of us could feel on any given day!!

Knowing that we are emotional beings, the key is to use our emotions to our advantage. Just like jogging with the wind at your back, it is a nice little boost to use our emotions to give us a little edge. So, rather than tackling the debt like a math problem, we can tackle it in a way that will give us emotional boosts! After all, isn’t it better to get out of debt and spend an extra $100 in interest than to give up halfway to our goal because we were discouraged?

Status Bars and Debt

status bar Ever wonder why there are status bars showing you the progress of the item you are loading on your computer? It is to keep us from going crazy while waiting 10 minutes for the computer to do what we told it to do!! Even though that little bar moves slowly sometimes, it is encouraging because we know how much longer we have to endure the torture of waiting.

It is extremely DE-motivating when there is no end in sight. Without that “light at the end of the tunnel”, it can be hard to keep going. That little bar that shows us the progress that we have made gives us hope. What if there were no status bars? Or what if you saw no progress on the bar until you got to the 70% loaded point? Would you keep waiting or would you reboot, assuming there was a problem?

When on the phone, have you ever been waiting on hold for 15 minutes wondering, “Did they forget about me? Should I wait it out? What if they never remember that I am on hold?” Do you cut your losses or wait it out, having no idea when they will pick up, or if they ever will?

This is the advantage of using the snowball approach to paying down debt. If you focus on the highest interest rate, it could be months or even years before you reach that first milestone. Would you have the endurance to keep going that long without reaching that first milestone?

It is a wonderful feeling to be able to celebrate your first milestone – paying off the first credit card is a blast! Speaking from experience, I was fueled with motivation after reaching that first milestone. The fact is that most people are strengthened by seeing even a small goal accomplished. I love the snowball approach to paying down debt because it focuses on reaching these small goals first and using them as motivation to keep going. Let me know how it works for you!

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  1. Sean

    What a great article that rings so true!! I have been meaning to get a copy of Dave Ramsey’s book, and this just enforces that idea.

    Thank you for a quick breakdown of the process! I love the fact that you mention if we done every thing 100% correct (as we know we should), we would not end up in some of the situations we get into.

  2. bob

    Yea, the whole mathematical process of getting out of debt is based on the faulty assumption that we make all of our decisions mathematically!!

  3. Tampera Ward

    I just discovered your website today- HELP!! I need financial advice- I live in Southern California, and I need the name of a reliable debt counseling service- if you could reccomend one, I would appreciate it.

  4. WildThing

    This is good advice, but it would be better advice to order your debts by paying off the highest interest rate loan first. That way you lower your interest expenses the quickest and have more money to snowball.

    • Peggy Howett

      Did you read all of the article? He went to great lengths to explain why not to do that!
      Read it again—it may help you understand.

    • Donna

      It doesn’t work as well to do it by paying the highest interest first. We were trying that and switched to the snowball effect, it went faster and worked well.
      I have given this advice to others who are struggling too and they were amazed at the results too. Try it

  5. Nicholas Z. Cardot

    I think this is great advice. And I think that you explain why you should pay the lowest debt first very well. Great article!

  6. Not Stupid

    I make my financial decisions based on a mathmatical approach. Payoff highest interest first is the only way to go. It’s extremely satisfying to know that I’m saving myself money. Having a spreadsheet that shows you exactly how much you are saving compared to high balance pay off first or no extra payments is a great motivator. Paying based on the balance is bad advice.

    • Parker

      Maybe some people aren’t attached to savings like you are. It’s not stupid to do either, nor is it bad advice. It boils down to how you are emotionally stimulated to pay off your debt. Some people are happy to say I paid off X amount of dept now on to the next one, and some, like yourself, are happy to say it took me longer to pay off but I saved X amount by paying off this one first, now on to the next one…. I know with me, I’m like you, I’d rather save money long term and focus on saving money and getting out of debt, but my wife is the opposite, she’d rather be able to say we paid this one off, that’s one down, so many to go… I am pushed either way to just pay off the dang debt, so I’ll make my wife more excited about it by paying it off by balance. If we have debt that’s close to the same amount, we go to the one with the higher interest rate.

      Again, it’s not stupid or bad advice either way, however you are stimulated to get it done.

    • vas

      To Parker,
      Yes, I agree, it’s more about what is comfortable for you. I am more motivated to pay off the highest balance…it forces more consistent, higher payments, allowing me to be debt-free that much sooner.

    • Stuart

      You are wrong about paying it off sooner! By paying of the lowest ballance and continuing that pattern you will be out of debt much sooner than tackling the highest interest rate or account ballance first.

  7. dede

    The ‘snowball’ method…

    Does the ‘snowball’ method really work best? No. it does not.
    As Mr. Dave Ramsey will admit, the ‘snowball’ method is not his invention (as he may leads you to believe), and unfortunately the steps presented are wrong – paying the smallest amount or paying the largest interest rate loan – are not the proper methods – please watch your steps.

    • Kiesha Easley

      Hi Dede,
      I think you missed the point – he actually says here that this is NOT mathematically the best methods – it’s the best in terms of emotion. If most of operated optimally in the mathematical realm the way we are supposed to we wouldn’t have allowed ourselves to get into debt in the first place.

    • Danno G

      My wife and I have been working our version of the Dave Ramsey stuff for about 3 years now and it has really turned our finances (and our lives) around. During our Financial Peace University classes it was actually recommended to get a few of those smaller “payoff victory celebrations” under our belt first – Even posted a chart on our fridge. It was a great visual reminder to keep us motivated and on task. Later we began to work on some of the higher interest cards/loans. Then when you start seeing those results and realizing you are finally saving yourself money (and associated stress) – WOW! I now take the time to evangelize others when ever I can about our new found financial peace cuz you never know where people are and how they could be struggling just like us – or you! Encouragement goes a long way!

  8. Rhonda Dean

    Dave Ramsey knows what he is talking about……he has helped thousands upon thousands get out of debt, because he understands human behavior, which is what gets us into debt in the first place. Thank you Bob for supporting Dave Ramsey and all his ministry. You are such a blessing and I can’t wait to tell my friends about your site!

  9. Kizzy

    I am in financial debt right now. Today, I told myself that I would fast and pray about my debt. I “googled” scriptures on debt and came across your website. I truly believe God led me to your site, and I will try all of these steps. I will keep you updated on my progress.
    God Bless,

  10. Janice

    I went to your website because I wanted to know how to make money blogging. I’m heavily in debt-education loans and other financial nightmares. I looked through your site and read the article on reducing debt. The debt snowball approach made me smile. It’s been hard to smile these last few months, but the approach seemed so simple and appropriate. One thing I used to do with my children when they passed a test, endured the state assessments, performed on stage, or completed a difficult task was celebrate. How appropriate for paying off a bill!
    Thank you for making me smile and giving me hope.
    P.S. I read the rest of the article. We are emotional creatures in need of emotional boosts. I love math; I’ve been thinking logically and reacting emotionally.

  11. Marvin Velazquez

    I LOVE this article. I once took a card card information seminar in college where they taught you the interest rate approach to paying down credit cards. Being an engineer, I always thought this was best AND it made the most sense. Little did I know that real life and real emotions don’t always let this happen. My big credit card debts seem so endless but if I pay off the little ones first, that will keep me motivated and well on the path to being debt-free. Thank you for this great article!

  12. Veronica

    I like this article because it challenges the normal thought process on tackling debt. That said, I believe it omits a crucial step prior to starting the “snowball”, which is to find a way to lower the interest of your largest loan. Ask and you shall recieve – negotiate with the loan provider or take out another loan at a lower interest rate and cancel credit cards as you move out the balance (keep one or two). If you can’t move the entire balance to a lower rate move some, you may even be able to put your largest debt on a 0% introductory rate credit card while you pay off your other debts (be careful with this – move it before the grace period ends).

    Once you’ve lowered your interest rates as best you can, then start the “snowball” and hopefully your loan with the highest interest rate will coincide with your smallest loan. I applied this method along with other sacrifices and dropped my debt from $30,000 to $10,000 in a little over a year.
    I still really appreciate this article and website and kudos to Larry for providing a logical status bar and effectively shining the light at the end of the tunnel.

    God Bless,

  13. Carol J. Alexander

    Bob, I’m loving these exercises. Can’t wait to see what’s coming down the pike. The only debt we have is our mortgage but I still have an opinion about your ‘snowball’ method. Those that advocate paying the highest interest rate–that is great IF IT WORKS for you. If it doesn’t work, and you give up in despair, you got nowhere and are still in trouble.
    Also, I’ve noticed that most people suffer with their debt load because of their emotions. We go out shopping and spend, spend to make us feel better. Obviously someone in that situation would do better with the “snowball” method than the mathematically correct one.

  14. Doug

    I fully understand the smallest to largest debt game-plan. But when seeing that this method will cost us over $1300.00 in additional interest, well, it’s an easy decision for us. Sorry Mr. Ramsey. Sorry Bob. It’s highest interest rate to lowest for us. No amount of motivation gained from paying off the smallest to largest debt could persuade us otherwise. I’ll take the small wins of knowing what I am saving in interest rather than paying in interest.

    • Victoria

      As Carol stated, you have to choose the method that is most comfortable for YOU, as long as it WORKS. I don’t have a huge amount of debt, so the snowball method works fine because I can eliminate balances before interest rates climb very high. It is so gratifying to see the results! Thank you, Bob, for reinforcing the concept.

  15. Joolie

    The snowball works – and there’s a reason Dave Ramsey calls them Baby Steps … two years after beginning our debt snowball, we can say (as of December 2011) we’re debt-free except for the mortgage. No, it didn’t make sense mathematically, but by starting small (baby steps) the emotional payoff was two-fold: 1) we could celebrate that we’d paid something (ANYthing) off, and 2) our payment toward the next debt was greater by using the payment we’d been making on the smaller debt.
    Further into the process we began moving debts around to pay off some higher interest debts, but by then we were believers and knew we would achieve our goal – we no longer needed to convince ourselves with little successes.

  16. Robert Vazquez

    Wow! I came across a person who has been making extra money through a blog. I was curious to find out more about bloging and came upon your site. This is going to sound dumb, but I was so cought up in reading about how to start a blog that I didnt realize that you offer the kind of help I am looking for. I am seriously going to go home and do this. Since this is the begining of the year, my wife and I had a goal to catch up on some past due bills so that we could start fresh in 2012 and start paiying off debts. Thank you so much for putting this out there for people like me to be blessed through.

  17. [email protected]

    I think the best part of the debt snowball is that it gives you relatively quick results to keep you motivated. If you are able to pay off a $1,000 credit card within a few months, you are motivated versus plugging away at a $12,000 credit card with a higher APR. it is nice to see results right away.

  18. Joanna

    Love your positive take on managing money problems – people everywhere will be feeling a whole lot better. Lots of tips to save money, too. Keep up the good work!

  19. Anne Shanmugam

    Thank you for this blog.

    This is exactly what I have done and got out of debt through this method.

    Be Blessed and continue helping others to get out of debt. God will honour you for your faithfulness.

  20. Stacey L

    As I continue to go forward with your email class, I’m finding several things I knew, but didn’t know how to put them into action, and numerous ideas and opportunities to create organization out of chaos. My neighbor approached my about how I set up my budget in excel, wanting to learn how, we sat down and started searching, reading. She came across your site, after downloading the excel spreadsheet, I’ll admit I was a doubting Thomas. Why would someone offer for free what others are charging for? I read articles, blogs, and then signed up for the email class, thinking what could I possibly get out of this. I made the commitment to work the first 5 homework lessons, I only made to the fourth and now here I am posting or testifying, take it as you will, anxiously, waiting for the next lesson. Something I did just this last week was to payoff 2 of our smaller debts prior to reaching this lesson. I’m one to take the basic ideas and “think outside the box”. What I have done may not in fact work for everyone, but I’ll throw it out there for what it’s worth. Remember, I’ve paid off 2 smaller debts leaving me and extra $400.00 to apply elsewhere. In previous posts there seems to be controversy with mathematical vs. emotional. I’m a woman, so lets face facts I’m emotional. 🙂 Painting my darkest picture, I still saw enough light to find my way. I split the $400.00 extra and took $200.00 to apply to my largest debt, and the other $200.00 I’ve applied to my next smaller debt in line. One may argue, I could pay the smaller debt off sooner, and yes in fact that is true. However, I still have that huge debt charging me interest. By applying that $200.00 to both areas I lower the principal balance which lowers the interest on both ends. On both debts I still pay the minimum payment but I add an extra $200.00 on each and “logically” this should make a difference. When I get my next debt paid off that will add another $150.00 to the mix in which I’ll take $75.00 and add to the the $200.00 extra. I’ll share an example, My largest debt at this point is my truck, I purchased it Jan. 2011 for 21K, payments are $454 for 60 months, as of 9/2012 I owe just over $14. Base payment $454.00 + $275.00 = $729. I still have 48 months roughly to pay this truck off. But with making payments of $729 I stand to pay this truck off in approx. 20 months verses 48. Paying off in the half the time. As with any plan, there are bound to be situations, and with this in mind, it affords me some flexibility in case of an unforeseen financial situation. Don’t discount the commitment to the program. I am committed to seeing this project through, I love “baking cookies” and I love to eat them also. I am grateful my neighbor stumbled on to this website. Thank you so much for offering something with so much information.
    God Bless you all!!!

  21. Sara

    Thank you for your wonderful website. It really enlightened me. I am in a lot of debts right now. I really appreciate youe articles. God bless you. Thank you so much

  22. dana

    My boyfriend has good credit… He took out 2 cards and transferred my debt to the new cards with NO interest for 12 months… I paid both of them in 9 months…. His credit now is Excellent! I have 2 more cards and then I’m debt free from credit cards (will be paid in 9 months)… Also, took me 4 years to modify my house loan.. Many tears, aggravation and stress.. But, I did it! Yipeee… Mortgage will be paid off in 6 years instead of 15… Interest rate fell from 7.75% to 2% first two year, 3% third year, 4% fourth year and 5% fifth year (not to go over 5%)…. Been selling on E-Bay, Craigslist, teaching on the side and having a full time job ($8.00 per hour)… It’s possible, don’t give up hope… I also have 2 room mates that pay me $500 for each room… Been taking lunches to work, cooking at home.. Shopping at resale shops, garage sales, etc… I’ve been driving my van 17 years old (no payments) for the last four years…
    My goal is to have my home paid for by the time I’m 60 (I’m 55 now…)….
    With God’s help I will debt free…

  23. Parker


    Please re-read the article. It’s not about the size of the savings you get when paying off the highest interest rate first, its about motivation to keep going. He explained this specifically in depth. You either didn’t read the entire article or you just feel like everyone should be robots with no emotional attachment to paying off debt.

  24. Jill

    I first learned about the Debt Snowball through Mary Christenson. Then I was reintroduced to it by Dave Ramsey through Financial Peace University. I love the concept and agree that it works if you work it. While paying off debt by paying th highest interest rate may make sense mathematically, it proves most frustrating to those of us who need the boost of seeing progress to remain motivated. The snowball concept works either way because you can use the money used from paying one debt to pay off the next debt. The main thing is to pay off the debt!

  25. Migdalia Rodriguez

    Thank you very much for your advice. I really appreciate you taking your time to help out people like myself with their financial troubles. I enjoyed going through the lessons, they were very helpful to me. It’s so great to fine someone that cares to help without having to ask for hundreds of dollars for advise. When your in financial debt, the words financial debt says it all. I was going to try a financial service, but they wanted to get me into more debt before I got out of debt, with just the fees that they were charging for advice. I thank you again and pray that God continues to bless you and yours.

    Much Blessing,
    Migdalia Rodrguez

  26. jim

    “Jogging with the wind at your back” – that is exactly right and explains it all. Great article. Thanks.

  27. Crissy

    We don’t pay the smallest one first. We pay with the highest interest rate and the ones that are threatening collections first. I agree that you need to see progress and it is hard to see progress with this method. So we started tracking our progress with a balance sheet. Every month I update our balance sheet and every month we watch our debt go down and watch our net worth go up. We even have a graph so we can watch the line go up. In the beginning of 2013 our net worth was -500 and now in July we have a net worth of $22K. For those who have to go about it logically and save on the interest I highly recommend tracking this way. It felt great to have both of our cars paid off in May and by this time next year we should be debt free except for the house.

  28. Paul

    I’m a broke college kid that managed to pay of $11,000 in student debt in the past six months! It truly is an amazing feeling. It was hard but I found ways to get extra cash and I stuck to my budget. As of today, I have $4,000 left and I will be debt free by March (while still in school).

  29. Michael Kampff

    I couldn’t agree more with the notion of little victories and building momentum. Momentum is our greatest potential force in reaching our goals. And momentum isn’t something that takes effort… it just happens naturally! If you’re struggling with false starts in some area of your life, start smaller, have success, and build – a recipe for financial success as well as success in many areas of our lives!

  30. melissa

    Overall, I love the debt snowball and Dave Ramsey principles. They are solid concepts. However, life still happens and sometimes it may feel like one step forward, three steps back. For instance, several years ago, my husband and I paid cash for a used vehicle that should’ve lasted us for years. Unfortunately, it died within one year, and we were unprepared financially to purchase another vehicle. So we went back into debt. *sigh* We currently are debt free again except for our house, but both vehicles are very old and will need replaced. Maintaining a debt free life is still challenging…

  31. Diane

    My husband worked in the construction industry for many years. There was very little work during the winter months, sometimes only 1 or 2 days a week. Your method works wonderfully for people with irregular income.

    We always paid off the smallest bills first. It avoided late charges when money was tight during winter. For example, if we owed 8 bills during the summer but paid off 3 of them, then we only had to come up with 5 minimum payments in January and February.

  32. Tony

    Dave’s plan just flat out works. The debt snowball is not about the numbers, it’s about behavior, which is what gets the vast majority of us in trouble with debt in the first place. I know from experience, I am a Finance major and we worked his plan to pay off over 100K in consumer debt. He has helped thousands of people, like my wife and I, pay off millions in debt. When you can match that then maybe you might have the authority to criticize his plan. Until then let’s agree to encourage people who have decided to do anything about it at all.

  33. VoniBear

    I’m reading the comment section below the article. (Great article, btw.)

    I think those who maintain that the best angle is the mathematical payoff of high interest rates first, might be people who are not as desperately in debt as some of the others. If you’ve never experienced the overwhelming hopelessness of tens of thousands of dollars (or more) of debt, you will have absolutely no comprehension of the black hole that is devoid of hope, as those who do. For those of us who have been there, I truly understand the psychological and emotional uplift a small financial victory brings and how that compounds to produce more belt-tightening and determined perseverance towards more small victories.

  34. Valentine Makhubela

    I was heavily indebted 5years back and every time I paid the debts I could not finish all the information you are giving for free I paid money to buy books ,after consulting and seeking help instead I could not be helped I ended up buying opm claimed to be investment which do not have growth but are increasing annually fooling you to. Believe that there is growth on the money you are investing .following the step by step which were mentioned on those books which are similar as yours I ended up having reduced 13 tiers of debts to two tiers where snowball like process was followed from where banks declared you bankrupt and requested to look for another institution to receive your income it was a hopeless situation but manage to pull through faith and believing in God . where I ended up having bought another property for investment purpose while concurrently paying / servicing those debts .WhatI am implying is that God is using Bob to help those who are . Bound by the Chains of debts to be released I could not believe what I was seeing but I thank God for your assistance and will also spread it to our families / relatives,,colleagues and friends Hey because debts can make you miserable. and sick where even the scientific medicine cannot cure you, these just needs total transformation of your mind to make these knowledge to be of value to you and once you understand it you won’t slip back to debts you will even teach and instill the knowledge to your children and grand children .
    After all I have went through I learn that I had anxiety and I thank god for deliverance from that and the fruit of the spirit of perseverance grew

    Valentine Makhubela

    • Mindy

      Paying your lowest debts off first and then using that money towards another bill is a great idea. Yes, logically paying the higher interest card first makes more sense. But, look at it this way some people can’t find it in their budget to pay more money on their higher interest cards, anyway, but if you paid the lowest one off first, you can then use that same payment you were making towards the other card, and apply it to the next card and so on. It makes perfect sense. You had that money in your budget for the minimum payment on the smaller card anyway so it makes sense to use it now towards the other card. Starting with the lowest gets the ball rolling a lot faster that way. Then once you have a handle on things then pay the higher debt next.

      Make sense?

  35. Yolanda

    Love the snowball effect, it can be very gratifying and up lifting when a debt is paid off and the funds can be applied to another debt.. However, as our situations change, when faced with an interest bearing mortgage and a second mortgage that has no interest, late fees or penalties, I think it is better to tackle the interest bearing mortgage first.