< shift/library / financial

Debt Snowball Method

financial · medium · 1 hour for initial planning; 30 minutes monthly for payment management

What is Debt Snowball Method?

Pay off debts from smallest balance to largest, regardless of interest rate. The psychological wins of eliminating debts completely maintain motivation better than the mathematically optimal approach.

Is there evidence for it?

EVIDENCEmoderate

How do you do Debt Snowball Method?

  1. 1.List all debts from smallest balance to largest balance
  2. 2.Make minimum payments on all debts except the smallest
  3. 3.Throw every extra dollar at the smallest debt until it's completely paid off
  4. 4.When the smallest debt is gone, roll its payment into the next smallest (the 'snowball' grows)
  5. 5.Repeat until all debts are eliminated — celebrate each payoff to maintain momentum

How long does it take?

1 hour for initial planning; 30 minutes monthly for payment management.

Is it hard to start?

medium.

Source: Dave Ramsey (The Total Money Makeover, 2003). Research: Gal & McShane (2012) study found people who concentrated on paying off one account at a time were more likely to eliminate their debt. Note: debt avalanche (highest interest first) is mathematically optimal but psychologically harder.
debt-repayment · motivation · psychology · momentum · quick-wins · personal-finance
> find what fits you

Related in financial

Dave Ramsey's Baby StepsA 7-step sequential program for eliminating debt and building wealth. Starts with a $1,000 emergency fund...Index Fund Investment Strategy (Boglehead Philosophy)A passive investment approach that buys and holds low-cost, broadly diversified index funds rather than...Automated Savings (Pay Yourself First)Set up automatic transfers from checking to savings/investment accounts on payday, before you have a chance...Financial FastingPeriodic extreme frugality (like intermittent fasting for spending) where you reduce expenses to absolute...Money Mindset ReprogrammingA practice for identifying and rewriting unconscious beliefs about money that limit earning, saving, and...Financial Anxiety Gratitude PracticeA daily practice specifically designed to counteract financial scarcity mindset and money-related anxiety by...

> everything in financial

This is one entry from the library Shift matches against. It is general information, not advice about you, and nothing on this page came from anyone's conversation.