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What is the Debt Snowball Method?

by

JG Wentworth

July 17, 2024

8 min

Household Budget Worksheet

Being trapped under a towering mountain of debt is an anxiety-inducing, suffocating experience. You’ve got credit cards, student loans, auto loans, and other pestering bills digging into your paycheck each month. No matter how much you throw at it, the debt refuses to get smaller. 

But what if there was a straightforward, psychologically-motivating strategy to steadily chisel away at that frightening mountain of debt? One that prioritized small, achievable wins to fuel your debt repayment momentum? 

That’s the empowering premise behind the “debt snowball” method pioneered by personal finance guru Dave Ramsey. It’s a simple-yet-brilliant system for eliminating debt from smallest balance to largest through a snowballing series of small victories. 

This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions. 

How it works

There are four main steps to utilizing the snowball strategy: 

  1. List out all your debts from smallest payoff balance to largest, regardless of interest rates. 
  2. Pay the minimum on all debts except the smallest. Throw every possible remaining dollar at the tiny debt at the top. 
  3. When that smallest debt is paid in full, roll the amount you were paying on it into the next smallest debt amount. 
  4. Repeat this method until each debt is gone, creating a snowball effect where your payment amount grows over time. 

 

So, if your debt list looked like: 

  • Debt 1: $500 
  • Debt 2: $3,000 
  • Debt 3: $10,000 
  • Debt 4: $18,000 

 

You’d attack that $500 balance first while paying minimums on the rest. Then, once debt 1 is demolished, you’d roll that payment towards slaying debt 2. And so on, with your debt snowball payment growing larger and more unstoppable over time. 

 

The psychological motivation 

On paper, sure, the debt snowball runs counter to pure mathematical logic. You’re not necessarily paying off highest interest accounts first, which could potentially cost more over time. 

But when it comes to consumer debt psychology, the debt snowball is a masterpiece. Those small quick wins provide a massive motivational endorphin rush. As Ramsey puts it, “Personal finance is 20% head knowledge and 80% behavior.” Focusing on small early debt wins reinforces the positive behavior and commitment needed for the long haul. That dopamine hit drives you to keep plowing forward with snowballing intensity. 

The debt snowball doesn’t ignore interest rates entirely either. Once smaller debts are cleared, you’ll start rapidly taking down those higher interest loans. And make no mistake, momentum is incredibly powerful for paying down debt. Those small but frequent wins become invigorating and allow you to see tangible progress. Compare that to slogging through years making minimum payments with no sense of accomplishment. 

 

Potential drawbacks 

While remarkably effective, the debt snowball isn’t a perfect solution and does have some potential downsides to consider: 

  • If early debts have low rates, you could pay more total interest attacking them first. 
  • It can take longer initially to get to high-interest debts, costing extra over time. 
  • Paying minimums on large debts can result in never-ending interest costs. 
  • The psychological impact may wane if smallest debts are too insignificant. 

 

Generally speaking, the pros outweigh the cons when it comes to implementing the snowball method. In some cases, those with the mental fortitude to withstand delayed victories, the “debt avalanche” method may mathematically prove slightly more efficient at times by starting with the highest interest rate. 

But for most, the debt snowball’s frequent dopamine hits and reinforcement of debt freedom habits make it the ideal motivational pathway. By combining focused intensity with small, replicable wins, Ramsey brilliantly tapped into the psychology behind sustained consumer debt repayment success. 

 

Accelerate your debt resolution

If scaling your mountain of debt solo seems like an insurmountable task, give JG Wentworth a call to speak with one of our dedicated debt relief specialists. If you have $10,000 or more in unsecured debt, you may be eligible for our Debt Relief Program.* We’ve helped countless individuals who felt like they didn’t have a path forward reclaim their financial freedom. Some basic perks to consider: 

 

  • One monthly payment 
  • We negotiate on your behalf 
  • Average debt resolution in as little as 48-60 months 
  • 24/7 support 
  • We only get paid if we settle your debt 

 

If you think you qualify for our program, give us a call today so we can go over the best options for your specific financial needs.  

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Step 1 of 4 - Debt Amount

Choose your debt amount

$10,000 $100,000+

Making momentum 

If staring down an ominous amount of debt has you overwhelmed and immobilized, construct your snowball by listing, targeting, and flattening those debts from smallest to largest. You’ll be shocked at how rapidly one small victory builds upon the next into a viable path forward toward reclaiming your financial freedom.  

And should you need help creating an actionable plan to resolve your debt, JG Wentworth is here to go over the best options for your specific needs. 

 

SOURCES CITED 

Kamel, G., “How the Debt Snowball Method Works.” Ramsey. Aril 22, 2024

*Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 43% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required. 

Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment. 

JG Wentworth does not pay or assume any debts or provide legal, financial, tax advice, or credit repair services. You should consult with independent professionals for such advice or services. Please consult with a bankruptcy attorney for information on bankruptcy. 

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