If you’re a normal person, you’ve had to deal with debt at sometime in your life. With numerous ideas on how people think you should handle debt, the process can quickly become overwhelming. So let’s simplify and figure out why the snowball method is better for paying off debt.
Now if you’ve tried this before or even argue other approaches are better, read on. It might surprise you to understand more about why the snowball method works so well for some, and not for others.
Two Basic Approaches To Debt: Snowball vs. Avalanche
When discussing using the snowball method to pay off debt, people will be quick to compare it to the avalanche method. This is rightfully so, not just because of their names but also because of the contrast in how they each work.
Let’s outline each method before getting into the nitty gritty of why the snowball method may be better for you paying off debt.
The Snowball Method
The snowball method is a debt repayment strategy that builds motivation and drive by focusing on small wins. Made popular by personal finance expert Dave Ramsey, the snowball approach encourages individuals to pay off their debts starting with the smallest balance first, regardless of interest rates.
Here’s how it works:
1. List all debts from smallest to largest, ignoring interest rates.
2. Make minimum payments on all debts except the smallest.
3. Put as much extra money as possible toward the smallest debt until it is fully paid off.
4. Once the smallest debt is paid, roll its payment amount into the next smallest debt, creating a “snowball” effect.
5. Repeat the process until all debts are eliminated.
The primary advantage of the snowball method is psychological. By quickly knocking out smaller debts, you’ll experience quick wins that can build confidence.
While it may not be the most mathematically efficient method (compared to the avalanche method, which targets high-interest debt first), it’s simple, quick-win focus makes it a popular and effective approach for so many people.
The Avalanche Method
The avalanche method is a debt repayment plan that focuses on lowering the total amount of interest paid over time. Unlike the snowball method, which prioritizes small balances, the avalanche approach targets high-interest debt first. In turn this makes it a more mathematically efficient way to become debt-free.
This is how the avalanche method works:
1. List all debts in order of interest rate, from highest to lowest.
2. Make minimum payments on all debts except the one with the highest interest rate.
3. Apply any extra funds toward the highest-interest debt until it is paid off.
4. Once the top-interest debt is paid, roll that payment into the next highest-interest debt.
5. Continue the process until all debts are eliminated.
The main role of the avalanche method is to reduce the total cost of borrowing. By wiping out the most expensive debt first, you would save money on interest and may become debt-free faster than with other strategies—provided you stay consistent.
While it may take longer to see the first debt paid off (which can be less motivating for some), the avalanche method is ideal for those who focus on financial efficiency and long-term savings.
Why You Should Use The Snowball Approach To Pay Off Debt
1. Quick Wins Build Your Motivation
The snowball method targets the smallest debts first, regardless of interest rate. Paying off a debt completely—even a small one—can give a happy mental boost and a sense of progress. This will help you feel in control, successful, and drive you on with momentum for paying off your next debt.
2. Using The Snowball Method to Pay Off Debt Simplifies the Process
It’s often easier to stay organized and focused when you’re knocking out one balance at a time. Seeing fewer accounts with balances helps reduce overwhelm and simplifies money management.
Also, for anyone who has numerous debt sources, the process of picking through each one to determine interest rates or accumulating interest can be awful. Taking out that tedious part and getting right to the task can make using the snowball method better for paying off debt.
3. Improve Your Good Habits Through Positive Reinforcement
Each small success reinforces the habit of repayment. That repetition of accomplishment can turn into a positive behavioral loop, encouraging you to have consistency and discipline.
Those who use the snowball method to pay off debt also quickly accumulate larger sums of money being paid on each next debt. It’s a very satisfying way to watch your money work for you.
4. Using The Snowball Method to Pay Off Debt Reduces the Risk of Giving Up
The avalanche method can take longer to show results because it starts with the highest-interest debt—which might also be a large balance. The lack of visible progress early on can cause frustration and increase the risk of abandoning the plan.
When using the snowball approach, you’ll have a shorter term goal. This means you can check one source of debt off your list in the fastest way possible. And when it comes to debt overwhelm, checking off even one can feel like such a huge weight lifted.
5. Better Fit for Your Relationship with Money
Not everyone is driven purely by numbers. People who respond more to emotions, goals, or habits might thrive on the momentum of the snowball approach, even if it’s not the most mathematically efficient.
It is so important to keep this in mind when choosing which method to pay off debt with. You know yourself better than anyone else so don’t let them tell you how to do it. For the best results, choose for yourself based on what you know about yourself so you can be the most successful.
6. You’ve Tried Other Methods and Failed
Just because you’ve been working to pay off debt and are still not out doesn’t mean you’re bad at paying off debt. You just haven’t found the best way to manage it. Maybe this is where the snowball method will come in handy.
Do not get discouraged! Moving through the ugly parts of life, like having to pay off debt, comes with only one advantage. We get to discover our own personal way to get through it. Let yourself be kind to yourself as well as flexible when it comes to how you approach paying off debt.
Things To Keep In Mind When Paying Off Debt Using the Snowball Approach
As with any financial decision it is important to keep it real. Know how to cover all points of your finances before jumping into a debt paying decision. Here are reasons you might not want to use the snowball approach to pay off debt:
- It can cost more in interest in the long term.
- The overall repayment of debt could take more time than with the avalanche method.
- In terms of straight numbers, the snowball approach is less financially efficient.
- It may exclude debts that are high risk to your financial security.
- You may have a skewed sense of progress while interest builds up on other debts.
If you’re deciding between methods, you could choose to blend methods. For example, start with a snowball to build momentum, then switch to the avalanche to save money.
Final Thoughts on Why The Snowball Method is Better for Paying Off Debt
Through all the trials of life, we hope that paying off debt can become easier to navigate as you explore your options. When you’ve tried and felt discouraged by the debt in your life, let yourself try things differently.
Even if there are nay-sayers, decide for yourself which approach for paying off debt works best for you. And maybe now you’ll know if the snowball method will work better for you than other options.
About the Author
Anna is a twenty-something living in the south. She's passionate about family, crafting, and continuing her education beyond her college degree.