What is a Debt Snowball?


What is a debt snowball?

Is it something that could help you reach your financial goals?

The debt snowball is a method of debt elimination credited to financial guru Dave Ramsey. It is mentioned in his book The Total Money Makeover, and there’s tons of free information online as well (see my resources section at the end of this post).

what's a debt snowball?

If Dave Ramsey was in charge in my household (he’s not, but more on that later), he would list my current debts from smallest to biggest. Everything except the mortgage, which you will get to that later in baby step # 6 if you are following his plan. You ignore interest rates of your debts, unless two debts are the same amount. In that case you’d list the highest interest rate debt first.

Once you have your list, you pay minimum payments on all of the debts except the smallest. The smallest debt you attack with everything you’ve got (minimum payment plus every extra dollar), until it’s gone! Then you take the money you were paying on debt #1 and start attacking debt #2 with everything you’ve got! Repeat until you are out of debt.

You’re supposed to get a great feeling of accomplishment from quickly smashing your smallest debt and then build momentum as your snowball grows, crushing the rest of your debt. Make sense? Here’s our debt snowball, according to Dave:

Debt List: Smallest to Biggest

(*note, the numbers used in this example are from 12/25/15. I will update on our progress and give fresh numbers in my next money post!)

  1. $848 owed on Cell Phones ($70 payment, as part of our cell phone bill)
  2. $978 owed to Medical Debt #1 ($100 payment)
  3. $1,202.24 owed to Credit Card #1 ($0 payment due to no interest/no payment promotion)
  4. $2,024.16 owed to Credit Card #2 ($68 payment)
  5. $2,623.65 owed to Medical Debt #2 ($188 payment)
  6. $2,724.06 owed to Credit Card #3 ($105 payment)
  7. $5,278.64 owed to Medical Debt #3 ($145 payment)
  8. $8,645.78 owed to Credit Card #4 ($220 payment)
  9. $17,619.57 owed on Car Lease ($275 payment)
  10. $31,070.91 owed on Car Loan ($497 payment)

The debt snowball works by rolling payments together, so you are always attacking your debt with as much money as possible. For example, the minimum monthly payment for our lowest medical debt is $100 per month. Once that is paid off, we don’t get an extra $100 to put back in our budget. Instead, we would add the $100 to the $188 minimum payment to medical debt #2 (making a $288 payment), until that debt is paid off. Keep building your snowball bigger and bigger, focusing on attacking on debt at a time, until you are completely debt free (expect for the house)!

Goals, Priorities, Compromise

If you read How I’m Getting Financially Fit in 2016, you know my #1 goal was to set up a $1,000 baby emergency fund (Dave’s baby step #1). Paying off debt via a debt snowball was actually #3 on my goals list! (read the post if you’re curious to find out what goal #2 was!)

You may also know, after reading Why My Financial Plan is Going to Fail, that my husband didn’t agree with my plan! His goals are different and we are compromising. Reaching financial goals together can be tricky, as I’m learning as I explore our individual money stories.

If you were wondering how our plan might change, here is what we are going to do:

Debt payoff will be our number one priority (before an emergency fund). And when it comes to the debt payoff, we are not going to be following Dave’s debt snowball guidelines exactly.

We have agreed that the cell phone debt is the least important debt to tackle. The payments are painlessly rolled into our monthly bill and we don’t have an urgency to pay it off. We do feel an urgency to get out from under all of our medical debt from our second son’s birth almost a year ago. So our debt snowball will list the medical debts from smaller to largest first. Our next priority is definitely credit card debt, so add those to the list in order from smallest to largest. Finally, throw in the two cars (one lease, one loan), and then the cell phone debt at the end.

Our Re-Prioritized Debt Snowball

  1. $978 owed to Medical Debt #1 ($100 payment)
  2. $2,623.65 owed to Medical Debt #2 ($188 payment)
  3. $5,278.64 owed to Medical Debt #3 ($145 payment)
  4. $1,202.24 owed to Credit Card #1 ($0 payment)
  5. $2,024.16 owed to Credit Card #2 ($68 payment)
  6. $2,724.06 owed to Credit Card #3 ($105 payment)
  7. $8,645.78 owed to Credit Card #4 ($220 payment)
  8. $17,619.57 owed on Car Lease ($275 payment)
  9. $31,070.91 owed on Car Loan ($497 payment)
  10. $848 owed on Cell Phones ($70 payment)

I thought it was interesting that the first priority debt (medical debt #1) is almost the same amount as my previous #1 goal of a $1,000 baby emergency. Instead of $1,000 saved ASAP, I will have $1,000 of debt paid off ASAP. I’ll take it! I have been VERY motivated to get this ball rolling and eliminate our first debt, so stay tuned for an update soon!

Would An Avalanche Be Better?

The debt avalanche is an alternative method of debt elimination. I have spent less time researching the avalanche in comparison to the debt snowball, but I’ll share what I have learned. The concept is fairly similar except for the order in which you pay off your debts. For an avalanche you list your debts by interest rate (and this time you include your mortgage!). Highest interest rate to lowest interest rate. And then you begin paying off your debt, as you did in the debt snowball, by attacking your highest interest rate debt first. Proponents of this method claim it will get you out of debt faster and for less money.

I believe the debt snowball is the right choice for my husband and I. We need the quick wins to help us stay motivated and avoid debt fatigue.


If you need more information, these articles might be helpful:

How the Debt Snowball Method Works by Dave Ramsey

The 7 Baby Steps by Dave Ramsey

The Correct Way to Pay Off Personal Debt: The Debt Avalanche by Consumerism Commentary

Debt Snowball vs. Debt Avalanche – How to Pay Off Your Debt by Credit Karma

what's a debt snowball?

Have you used the debt snowball method? Would you consider it?

(Stay at home yogi is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com)

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  1. The psychology of the debt snowball appeals to me, and it’s basically the approach we’re taking. One of my goals for 2016 is to pay off our remaining car loan (about $2800).

    Good luck with your snowball!!

  2. I haven’t heard of the debt avalanche heh. Our plan in theory is to snowball but prioritize the higher interest rates. First we pick one of the loans with a low remaining balance and when that is extinguished, put the entire amount we were paying on it to the next loan with the highest interest rate. We are focusing on studebt loans, which have the highest rates, and not including mortgage because let’s face it that one will be there forever and the student loan debt needs to go first.
    Julie S recently posted…A Step-By-Step Guide To Increasing Your Blog’s Traffic [Infographic]My Profile

  3. Your debt payoff sounds like a great plan. I am curious what you would do in an emergency if you do not have your $1000 emergency fund set aside?
    Tina recently posted…Love – Do You Need More in a Relationship?My Profile

    • Sadly, the answer to that question is credit cards Tina. Add more debt. It’s not ideal, but it’s our current situation. I’m hoping after we clear some medical debt we can make the emergency fund a true priority. Thanks for reading!

  4. This is an interesting approach and one I think I’ll take a closer look at because even though I like to pay things off every month, I hate interest, so having a good strategy would be great just in case I need it!
    Cathy recently posted…Wordless Wednesday – Can You Guess Where This Photo Was Taken?My Profile

  5. I am a believer in the snowball for the most part with perhaps a tweak here and there according to your own circumstances. I think it is a great way to get excited and see momentum.
    Tiffany (NatureMom) recently posted…Cutting Cable From the Budget, Easier Than You Think!My Profile

  6. This makes a lot of sense. I can see how the snowball method would get make it easier to attack each debt as time goes on.

  7. We are kind of doing this but not exactly to Dave’s rules. It is really important to look at ALL of your debt and then decide where to start paying. Looks like you are making some great choices. Last year we paid off 2 credit cards and bought a new roof!! WOOHOO!!
    Censie recently posted…Mom’s Schedule Does Not Include a Sore ThroatMy Profile

  8. We did the debt snowball and it was amazing how fast we paid things off. We are nearly debt free now!
    LauraFunk recently posted…Ultimate Valentine’s Day Round-Up!My Profile

  9. I love how transparent you are in this post, it’s so inspiring for me! I definitely think the avalanche vs. snowball comes down to personality, and what works best for you. I’m trying the avalanche for now, but I might switch to snowball and see if it makes me more motivated.

  10. I’m learning so much from this series. I had no clue what a debt snowball was. Looks like I need to check out some of Dave Ramsey’s books. Thank you for explaining it to us. I
    Healing Mama recently posted…Friend Post Friday: Rambling Thoughts of A Mom on a JourneyMy Profile

  11. I too use my own version of a debt snowball. I can hear Dave echoing in my head saying follow his teachings exactly…but my credit cards and that high interest rate are begging to be paid off first! I think everyone puts their own spin on it, at least we are making an effort to pay it off right?!?
    Miranda recently posted…Ways I save on GroceriesMy Profile

    • I hear Dave’s voice in my head often Miranda, because I know he doesn’t approve of everything I do! lol 🙂 We all get an A for effort! 😉

  12. It’s funny that this came up today. My sister and I have been having conversations about money and this is something that I can totally relate to and use. Thanks for breaking it down and making it easier to digest.

  13. Why are you attacking the medical debt first? Is it high interest?
    RAnn recently posted…How to Save Money on HealthcareMy Profile

    • Hi RAnn, no the medical debt is not high interest, but we were drowning due to the total number of payments each month. We have since had it lowered, but one of the medical payments was over $580/month! We had to come to a compromise as a couple. Thanks for reading!

  14. Great idea and a fabulous way to approach debt, I’d be interested to try this myself. Your comment about having to compromise with your husband on your approach to your shared finances is interesting. Sometimes I think the hardest part managing money as a couple is agreeing on what your goals or priorities are.
    Robyn recently posted…DOUBLE CHOCOLATE ALMOND CHUNK COOKIESMy Profile

  15. I think the biggest difference when choosing between the avalanche method and snowball method are not only interest rates, but the difference in those interest rates. For example, my husband and I are currently using a mixture of the snowball/avalanche because all of our interest rates, besides one, are fairly low.

    We want to get our credit cards dealt with before we go after the highest interest one because they are all at 0% right now and we feel like we can make better progress there.

    I look forward to seeing you take this debt down one loan at a time! Good luck!

    • I totally get what you’re saying Liz. I think we all just need to look at the whole pictures when it comes to our finances and make informed decisions!

  16. I think any method you will stick to is great and emotional stress about particular debts definitely moves them up the list. In general I’ve ordered my debt by the amount of daily interest it costs me (the rates may vary but because of the amount of debt they are costing me more each day) but someone hitting my car is a huge concern so my car loan got bumped to the top of the list along with the bar loan my parents co-signed.

  17. I think that you should prioritize your debt list by mental victory. I know Dave’s point is that you’ll get a quick victory by paying off the smallest debt first, and that will give you momentum to continue. But for some people, a different debt is so nagging that it will be a better victory. It’s smart to know which debt will get your ball rolling better.
    Jamie @ Medium Sized Family recently posted…5 Ways We’ve Saved Money This Week 20My Profile

  18. Erin, I wish you both success with your plan! Working together to get financially fit is such an important goal. Thank you for sharing with us at Snickerdoodle Sunday!
    Laurie recently posted…Snickerdoodle Sunday #116My Profile

  19. We have always followed the avalanche and snowball system together. .. we attack the debt with the highest interest rate first and when it’s paid off we add that payment to the next. Seems to work for us. Best of both worlds! I am impressed with your honesty in these financial posts. Keep up the great writing.
    Tori recently posted…Becoming A Strong Woman: Life Lessons For My DaughterMy Profile

    • That’s awesome that you found a method that works for you guys Tori. It is really smart to get that high interest debt out of the way. Thanks for reading <3

  20. Good luck! It definitely feels awesome every time you pay off a debt! That’s probably the biggest benefit of the debt snowball. You always feel like you’re getting somewhere.
    Mel @ brokeGIRLrich recently posted…Financially Savvy Saturdays #127My Profile

  21. We used the debt snowball method to clear our debts (the avalanche method definitely didn’t work for us)!

    I like how you’ve reorganised your plan based on urgency – if you feel like you need to clear those medical debts first, then so be it. The main thing is that you have a plan and as long as you start and don’t stop, you’ll get there!

    Good luck and I’m looking forward to reading more about how you’re getting on.
    Hayley @ Disease Called Debt recently posted…Where to Sell Jewellery Online to Make Money FastMy Profile

  22. Rock on, Erin! Your transparency with this project will be a blessing to oh-so-many!!!
    Thank you for sharing your journey….
    Pat recently posted…Coffee & Conversation #79 – Your Voice, Your VoteMy Profile

  23. The Total Money Makeover completely changed my life! Good for you for attacking your debt! I really encourage you to get that baby emergency fund in place as soon as you possibly can. More CC debt is never a good thing and would put you right back where you were, but I also understand the importance of getting your spouse on board in any way possible. Best of luck in your journey to debt free! You are inspiring to so many!

    Visiting from Newbie News!

    • I really want that baby emergency fund Alyssa! Thanks for emphasizing it’s importance and I’ll keep bringing it up! And thanks for reading fellow newbie! 😉

  24. Thank you for sharing. We are now debt free (except our mortgage) and are working towards seriously building our savings

    I am sharing our journey this year as well. It can be hard to be so open so once again thank you for sharing.

  25. I should make a post to keep track of our debts and progress… but I guess I haven’t yet due to embarrassment. Sigh. Time to get my priorities straight and get over my pride. 🙂

    • You should do it Jenn! I felt scared, embarrassed and vulnerable at first, but now I’m motivated by having it all out there!

  26. An interesting summary of the snowball method. I wish you luck with it – sounds like a really great plan.

    Sally @ Life Loving
    Life Loving recently posted…Exercises To Do At HomeMy Profile

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