A closer look at Dave Ramsey’s debt snowball

by Ryan Yates

Consumer debt is currently a widespread epidemic throughout the world. A recent survey reveals that 43% of the Americans spend more than they earn each year. Bankruptcy rates are rising, underemployment/unemployment are a common thing these days but the cost of living continues to increase. Consequently, more and more people are getting entangled in an intricate maze of debt. However, if you are armed with a smart strategy and firm determination then a debt free life may not be just an elusive dream.

There are several debt reduction processes as well as programs available for people who are facing financial crisis. People with manageable debt usually avoid debt relief programs like debt consolidation and settlement and focus on popular debt elimination processes like Debt snowball. Dave Ramsey’s debt snowball has gained considerable recognition among the financial experts and people seem to have a taste for it. Does that mean it is the choice for you? You never know till you take a closer look. So let’s dig deeper.

A basic understanding of debt snowball

To pay off your debt faster and more efficiently, Dave Ramsey suggests that you should try to clear your loans one at a time. Your primary task is to make a list of all your debts starting from the smallest to the largest. Pay the minimum amounts on all your debts but concentrate on clearing the smallest debt first. Once you have paid off the first debt, concentrate on the next smallest debt. Now you have a loan less; so use the extra money towards the next debt. Continue the process until all your debts are paid in full. Since the money you can throw towards your debts gets bigger or snowballs gradually, the process is called debt snowball.

Arguments for debt snowball

This process would sufficiently motivate you to carry on with your quest for a debt free life. The smaller debts can be paid off easily and this gives you the necessary encouragement. You are bound to have a feeling that you are moving in the right direction. This is very important because if you don’t stick to the process till the end then your game is ruined.

Debt snowball is a rather simple process free from mathematical complications like calculation of interest rate. If you are someone who hates juggling with numbers then this should appeal to you.

Debt snowball is a relatively safe method in the sense that there is clearly a reduction in the total amount that you owe to the creditors in a single month. Here, you do away with the smaller debts easily; so the number of debts decreases in the first few months. This puts you in a better position when you face some emergency like loss of job.

Arguments against debt snowball

Critics of debt snowball point out that this is clearly not the cheapest way out of debt. Unlike debt avalanche, another debt reduction process, the snowball method does not consider the interest involved. As a result you don’t try to eliminate the debt with the highest rate of interest and end up paying more in the long run.

What if you have a secured loan? What if that is your biggest loan as well? Can you afford to pay it at last following the snowball method? Possibly not. The dark shadows of foreclosure will hang around you and eventually you would land up in trouble. So the effectiveness of debt snowball in case of secured debt is rather questionable.

Debt snowball will provide you tangible results which would be suitable for people who need encouragement. However, if you are a patient man with an analytical bend of mind and have certain degree of discipline then debt avalanche or the higher-interest-first method would benefit you more.

Dave Ramsey’s baby is indeed an effective way to eliminate your debt but it is not without cons. So remember what you have read and then carefully decide if debt snowball is the answer to your monetary troubles.

Jeff’s notes:

I am a true believer in the debt snowball process.  Not because it is mathamatically the best plan, but because it is the simplest.

Focusing on the smallest and using it as a stepping stone helps focus.  Without the momentum building of small victories, the war will be extremely hard to win.  Does the few hunderd dollars saved using the high interest first option really matter in the debt scheme.  NO, because you are in it for the long haul and the victories gained by paying off the smalls debts far exceed the savings.

I love to see other people’s though process and that why you are reading this today.  I have noticed one thing throughout my debt repayment process.  Those who use math to get out of debt have never been in debt.  If math was the key to blasting away debt, then we would never be in debt in the first place.


Que December 1, 2010 at

I agree with the debt snowball as well. The only time I would leave the idea is if I came into a large sum of money to pay off a bigger debt at one time. For example, I have several smaller debts. But if I came into $3500. I would go ahead an pay off my car (since that is all I owe.) The encouragement for me is the paying off of the item. Plus, I could pay off the smaller items but it wouldn’t free up enough money that my car payment would. So that would be the only time I would do that. Now, with that in mind, I’m never going to get a large sum of money like that. So I will continue the debt snowball as planned. lol. I have cleared out 24 debts using the system and I have 21 to go. So it’s working for me. 🙂

Jeffrey Kosola December 1, 2010 at

Hey Que,

Just as personal finance means different things to different people, so does the debt snowball. I followed the debt snowball to the T until I needed to make a change. I choose to pay off my largest loan, my 2nd mortgage this year instead of following the program. It was my largest interest rate, but I did it because I didn’t want to have a second note on my house if I had to get out next year. I want to sell next year and not having that over my head was my goal. We’ve since changed our mind and are going to wait another year, but is sure felt cool to blast that one out of the park. I’ll looking forward to you paying off that car 🙂

Jeff @ Sustainable Life Blog December 1, 2010 at

I’d have to say that I side with the debt snowball – I tried many things before and they just didnt work. The debt snowball may have you spending a bit more money than a mathematical method, but what difference would it make at that point? You’ve been over spending for quite a while (or you wouldnt be in debt in the first place). While I have been following the debt snowball on my quest up to this point, I think I’m going to deviate from it after I finish a student loan because the amounts are almost the same, the interest rates are close, and it will unlock about 1/2 of my paycheck and increase cash flow drastically.

Jeffrey Kosola December 1, 2010 at


That’s a great idea. The snowball helps us build the habits to be able to handle smarter decisions like the one you are going to do. I say go for it. The small wins from the past have already helped you win in the future.

retireby40 December 1, 2010 at

I just got the book from the library yesterday. I’m going to disagree and say pay the highest interest first, but we don’t have any consumer debt so it’s easy to say that.
If you have the discipline and understand finance, then pay the high interest loans first. If you don’t then debt snowball sounds good.

Jeffrey Kosola December 1, 2010 at


Of course the best thing to do is pay the highest rate first, but those of us who are in debt didn’t get into debt by thinking that way 🙂 None of us got here by following good habits and our math skills. Complete neglect and bad habits that got me into debt. Now is good habits and a bit of math getting me out. Here how the math works in my house. More money in = Less debt. Thanks for the comment Joe

First Gen American December 1, 2010 at

I can definitely see the huge psychological benefit of having “1 less bill to pay” every month. It feels. I think snowball would be the way to go unless the time line to pay off debt is very long, in which case, I’d probably tackle the high interest items first.

Nate December 1, 2010 at

I think many people select the Debt Snowball plan by default, viz. most people (as you pointed out) are in debt and don’t have access to big chunks of money so the Avalanche approach can be more difficult for some. We’ve followed the Debt Snowball plan, but it is hard to see the interest.

Whether people use Snowball or Avalanche, I believe the nice thing is that it provides a guide or system for those motivated to get out of debt. We’re not just paying bills, we have a goal and purpose and that’s the great thing about either of these plans you mentioned.

Ken @ Spruce Up Your Finances December 2, 2010 at

I like the snowball concept because of the psychological effects and its simplicity. This is always one of the easiest method to follow without having to worry about the interest rates. It also makes things manageable knowing that you are accomplishing something especially if you have finish paying off one credit card and you can move forward with the next.

LifeAndMyFinances December 5, 2010 at

I love the debt snowball. I think it has helped many people, and will continue to help people for many years in the future.

Little House December 6, 2010 at

It’s funny that a couple of years ago when I started paying off my credit cards, I automatically focused on the smaller amounts first; because it felt like a big accomplishment to pay off a card in full. I didn’t know at the time that I was using the “snowball” method. However, I can’t say I stuck close to it; I just paid off one card at a time, pretty much from smallest to largest, until they were all paid off!

Corina McCoy December 6, 2010 at

Very insightful! Thanks for the information.

Dan December 13, 2010 at

The debt snowball works! It just works . . . And all of these geniuses that have figured out that there are other more cost effective ways to get out of debt have probably never been in debt to start with. Dave’s debt snowball worked for me and I am now freakin debt free!

Brad Bledsoe December 14, 2010 at

I am DEBT FREE! Dave’s debt snowball method work’s! I did not follow it exactly to the T as I fell off track and did stupid stuff at times. once on track I did not confuse the situation by calculating this or that interest rate. Dave says” if you were doing math you would not have this debt problem” KISS

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