Sep 19

Why the debt snowball wasn’t for me

snowballIf you’re interested in personal finance you’re probably familiar with the, “debt snowball” method of debt repayment. Popularized by author and radio talk show host, Dave Ramsey, the debt snowball is a debt reduction method whereby you list your debts smallest to largest and pay them off aggressively, one at at time.

Example: Let’s say you owe 3 debts. A $1000 debt with a $100 minimum payment, a $10,000 debt with a $300 minimum payment and a $15,000 with a $450 minimum payment. Once you start the snowball, you pay the minimum payments on each of the debts each month ($100+$300+$450) then throw whatever extra money you have on the smallest debt. So in this example, you’d pay $100 a month for the next 10 months (or less), until the smallest debt is paid in full.

Once your smallest debt is gone, you “roll” the minimum payment you were paying on the first debtΒ ($100) into the minimum amount you pay on the second debt ($300), for a total of $400 payed each month until the second debt is paid in full. Get it? The snowball is rolling downhill and you’re benefiting from it’s momentum! Rinse and repeat, on the 3rd, and biggest debt, until all of your debts are gone!

The theory behind why the snowball works is simple. After you pay off your first, “little” debt, you’re totally stoked and proud of yourself. So proud, you want to do it again (and again) until you’re debt-free! While I didn’t follow the snowball plan, I understand why it would be very motivating.

If the debt snowball is so, “great”, why didn’t I use it?

  1. I wanted to pay the loans with the biggest interest rates first. Basically, I’m pessimistic a realist and I wanted to make sure if I lost my job or had an emergency, my loans with the highest interest rates were paid first.
  2. The debt snowball would have cost me more money. I planned to pay off my $30,000 student loan debt in less than 3 years, and actually paid it off (once I really buckled down and got serious) in less than 2 years. In my case, using the debt snowball method wouldn’t have been any faster and I would have paid slightly more in interest since my, “biggest debt” had a 6.8% interest rate and my smallest had a 3.25% interest rate.
  3. I didn’t, “need” the psychological boast of paying off the small loans. I’m pretty good at motivating myself so I made a poster board “thermometer” documenting my debt payoff. Each time I paid off $100 I colored in a part of the thermometer. I think it was just as motivating as paying off my smallest debt first as part of the debt snowball.
  4. My debts were similar sizes. I didn’t have a really small debt, so my first, debt payoff “victory” would have been very delayed. Not exactly that instant motivation and gratification that gets you excited about debt pay down.
  5. A $1000 emergency fund wasn’t enough for me. Dave Ramsey encourages readers to have a $1000 emergency fund while they are, “debt snowballing” their debt. $1000 felt too small for me, so I saved more. It took me a little longer to pay off my debt because I had to build up an emergency fund first, but in the long run that’s what made me feel comfortable.

Don’t get me wrong, I listen to the Dave Ramsey show podcast regularly and appreciate Dave’s, “no nonsense” approach to personal finance. His, “baby steps” help people change their money and their lives. So if the debt snowball works for you, you should use it! It doesn’t matter how you chose to kick your debt to the curb, as long as you stay dedicated and motivated and work “your plan”, whatever it may be.

Did you/are you, “snowballing” your debt? Why or why not?


Image: Kamyar Adl


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  1. I did snowball mine, but my debt perfectly lined up for snowballing it. All 5 had the same interest rate and they staggered upward (smallest loan $3000, largest loan $20,000). If my debt had been different, I would have paid highest interest rate first, no matter the balance.

    I think you have an excellent plan!

      • KK on September 19, 2014 at 9:53 pm
      • Reply

      That’s great, sounds like it worked out perfect for you.

  2. I’m a staunch supporter of the debt avalanche rather than the snowball. Focus on those debts that are the higher interest first.

    The debt snowball method is supposed to make the user feel awesome that they paid of the smaller loan. However, I would personally be very pissed off if I’d just paid down the smallest debt in the knowledge that it cost me money to be able to “celebrate” this…!

    Debt avalanche rather than debt snowball all the way for me, no question:

      • KK on September 19, 2014 at 9:55 pm
      • Reply

      Agreed, it really makes the “victory” less sweet when you think about paying more money in interest to celebrate. To each his/her own, but for me the debt snowball wasn’t the way to go.

  3. I think we’re going to do a combination of snowball and paying higher-interest debts. Right now we’re currently not paying the full 10 year payment. This means that if I pay ahead on my biggest debt on the graduated loan plan, the minimum payment would reset as soon as we made some progress (2 years worth of payments ahead) and strap our monthly cash flow. So our plan is to get a few of the smaller debts down to reduce our monthly payments and then tackle the high-interest loan at 7.9% (I think). Have to get through something like 10K of interest and 13K of loans before we re-evaluate/

    Question for you: Dave Ramsey recommends paying off loans with a 1K balance until you’ve paid off your highest-interest debts. Your situation is similar to mine: my highest interest rate is only 7.9%. How did the lower interest rates affects your emergency fund plan/debt pay off plan?

      • KK on September 19, 2014 at 10:03 pm
      • Reply

      Sometimes it’s hard to know exactly what to do first. I know I was pretty confused when I first started my debt pay down. My plan was to save a full emergency fund, then pay down my loans aggressively (highest interest rate first). All of my loans were student debt so I started with my 6.8% loan and worked my way down. I had slightly over $30k of debt and paid it down in a little less than 2 years.

      Dave recommends having a $1000 emergency fund then paying off your debts smallest to largest (interest rate doesn’t matter to him, so the debt snowball doesn’t account for interest rates at all). So you could have a $500 debt with a 0% interest rate and a $20,000 debt with 22% interest rate and he recommends paying the $500 debt first (even though the $20k debt would be accruing a lot of interest really fast in comparison). Hope that answers your question, it it doesn’t let me know πŸ™‚

  4. No question that your approach will, for those who can stick to it, pay off debts the fastest and with the least amount of cash. Some folks need the positive reinforcement of totally retiring a debt to stick with a plan. For these people, the snowball may be the best choice. In the end, rather than delaying while contemplating which approach to us, choose one get started!

      • KK on September 19, 2014 at 10:04 pm
      • Reply

      Agreed, the most important step is getting started. The method you chose doesn’t matter as much as your motivation to actually make the change and kick the debt to the curb.

    • Syed on September 19, 2014 at 1:05 pm
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    Avalanche all the way. I can certainly see the appeal of doing a snowball though. I’m currently paying off my highest student loan debt which will take a few years but sometimes it’s tempting to get rid of those small debts just sitting there. But I know looking at the numbers I will save a lot more in interest payments over the long term if I stick to the avalanche.

      • KK on September 19, 2014 at 10:12 pm
      • Reply

      I can see the benefit of snowball and avalanche. Avalanche made more sense to me, but it’s an individual choice. If I’d had smaller loans it definitely would have made me want to “get rid of them”. But as you said, in the long run saving that interest is more important then saving a few minutes not having to write as many checks (if anyone actually writes checks anymore).

  5. I think that the debt snowball is a good rule of thumb, but as you pointed out, rules of thumb are not for everybody. They’re just a starting point for many, and they give you things to think about. For many, it’s the perfect plan, but for others it’s not. At least it got you thinking and able to make a comfortable decision. Your reasoning is rock solid.

      • KK on September 19, 2014 at 10:22 pm
      • Reply

      I think either approach is great as long as you stick to it and it works for you. I certainly wouldn’t push someone away from the snowball if that’s what they chose. Paying a little more interest to stay motivated and win the marathon is definitely worth it.

  6. I am snowballing (for the most part) because I do have debts of different sizes. Also for the most part, my smaller debts are also (thankfully) the higher interest ones too. So it just made sense to me. Now that I’ve gotten my furniture loan paid off, I can get the ball rollin’ πŸ™‚

      • KK on September 19, 2014 at 10:23 pm
      • Reply

      Sounds like the best case scenario. It does feel really good to get those little ones out of the way. Congrats on kicking the furniture loan to the curb!

  7. I am in a hybrid of sorts. Focus is on the highest interest rate item for sure but instead of completely putting all the remaining debts on the minimum payments one credit card that I negotiated a 0% interest rate for 12 months is getting more than the minimum. This debt is my highest interest rate before the temporary rate reduction so I am allocating just enough to pay off that debt in the allotted time minus a month.

    Any money i earn that is extra goes to the highest interest debt. Any money i can squeeze out of my budget goes to this debt as well.

    I love your reasoning. What ever plan that anyone uses has to be appropriate for their situation and mental makeup.

      • KK on September 19, 2014 at 10:34 pm
      • Reply

      I think taking a hybrid approach works well for most people. Some folks stick strictly to one method or another, and if that works for them that’s great. Otherwise you really just have to find a plan that makes sense for your personal situation (like what you’re doing). Wishing you a quick and easy debt pay down!

  8. While I can see that the “debt snowball” method has certain psychological rewards in paying off a debt, I personally can’t see the benefit of that minor mental milestone outweighing the fact that you have to pay more of your debt for longer. Mathematically, paying the higher interest loans first works out most effective. Good job!

      • KK on September 19, 2014 at 10:36 pm
      • Reply

      I feel the same way, but that’s probably just the way that our brains are “wired”. Some people really need that psychological boast to keep paying off the debt. There’s nothing wrong with that, but it’s just not what made sense to me.

  9. I only have a car loan but I’m with you. I’d probably pay the higher interest ones first too. Way to pay it off in two years!

      • KK on September 22, 2014 at 10:59 pm
      • Reply

      Thanks Tonya. I had to make some sacrifices to make it all work, but it was well worth it.

  10. I think I would prefer to pay debts with higher interest first. I like to see the biggest weight gone first, so I’m more motivated to get rid of the small ones — I think my brain fits better with this way of thinking!.

      • KK on September 22, 2014 at 11:00 pm
      • Reply

      Makes sense to do what “makes cents” for you (pun intended) πŸ™‚

    • Tre on September 20, 2014 at 11:27 am
    • Reply

    I have the same line of thinking. I attacked the highest interest rate loan first. I would have had the small ones paid off now if I used the debt snowball, but I really couldn’t justify paying more interest.

      • KK on September 22, 2014 at 11:01 pm
      • Reply

      Some people really benefit from the gratification of paying off that little debt first, but like you, it would have made me annoyed to know that I was paying more interest just to have that little “win”.

  11. We were using the snowball until I saw how much we were paying off in interest every month, then we started paying off the highest interest cards first. We just couldn’t pass up the money savings.

      • KK on September 22, 2014 at 11:03 pm
      • Reply

      Money talks. I couldn’t justify paying more interest to pay off my debts smallest to largest. I know people who have done the snowball and been happy that way, but it would have eaten me up knowing I was paying more than I had to.

  12. I agree with you. I would also pay the biggest interest rates first that contradicts the snow ball belief. Despite it, what Ramsey said that the list of debts from smallest to biggest is something that everyone should value when it comes to considering which debt to pay first.

      • KK on September 22, 2014 at 11:04 pm
      • Reply

      Either person has to decide what works for them. For me, paying off debt with the highest interest rates was effective.

      1. I agree with you KK. Personal management is really the key here. πŸ™‚

  13. I am kind of following it also. I figured I need to pay off the personal loan first before my student loans since that has a higher interest rate and the highest balance.

      • KK on September 22, 2014 at 11:05 pm
      • Reply

      I like a lot of what Dave Ramsey teaches, but the snowball wasn’t for me. If I were you I’d pay the highest interest rate loan first.

    • anna on September 22, 2014 at 3:47 pm
    • Reply

    I completely agree about paying off the debt with the highest interest first, but mostly because that’s the method I used. πŸ˜‰ Once I started seeing payments go directly to the principal and not interest, then it became more motivating to squash it more and more (whereas it felt frustrating to see most or some of it go to interest). But if it works for some, then by all means go for it!

      • KK on September 22, 2014 at 11:06 pm
      • Reply

      Great minds think alike πŸ˜‰ Seeing the principle go down fast is really exciting. When you’re just paying interest it can really be a buzz kill (I feel that way with our mortgage right now!).

  14. I actually really dislike a lot of “advice” that Dave Ramsay offers. For me, I would rather pay off the loan with the highest interest rate, rather than the one with the smallest amount – mathematically it is the best way to go.

      • Ann on September 28, 2014 at 5:59 pm
      • Reply

      i agree with the highest interest first, but also with a smaller debt too. Why? Yes, you will save interest in the long run, but having listened to John Cummuta, who wrote Transforming Debt to Wealth, he calls the Snowball ‘The Accellorator Margin’ and he recommends using the credit card as your ’emergency fund’, therefore you don’t waste time saving up 1000 in cash, but clear it from a credit card. Then freeze it in a can so that you can’t access it too impulsively.

      This makes better sense. Also I think looking at where you can invest in the current assets you own, in order to get a better income or save expenses, is a valuable step Dave Ramsey seems to overlook. If spending you’re extra cashflow on an asset which can increase in value and earn you extra income (without investing extra time), then that should come first. If you have assets/skills/knowledge you are not maximiising, then that should be pushed too.

      I decided to increase my income by working more hours and getting more by the hour. I will throw that into my Accellorator Fund.

  15. When I read Dave Ramsey only suggested $1,000 in emergency funds, I was shocked. I’ve always felt it should be at least $2,000 because in the worst of emergencies, $1k isn’t going to be enough. That being said, I’m doing a hybrid of repaying my student loans. I’m paying off one loan at the end of the year since it’s under 1K and I plan on doing that with any loans that get that low. I’m paying equally on student loans, regardless of interest rates and it is helping to keep me on top of them. It’s just a slow process.

  16. Good for you. Not paying your high interest loans first is a ridiculous waste of money and I am baffled that somebody who advocates this idea somehow has a nationally syndicated radio show that people listen to.

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