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.