Why You Should Avoid the Debt Snowball (and What You Should Do Instead)

The debt snowball technique for paying off debt was made popular by Dave Ramsey in his book The Total Money Makeover.

Touted as a great way to get out of debt, there’s no doubt that the debt snowball method has helped many in their journey to better financial lives.


While undoubtedly a helpful concept, the debt snowball method also has some drawbacks. Additionally, some people complete the debt snowball method to repeat the cycle and get back into debt. This is an interesting conundrum and one that suggests that the debt snowball should only be part of your plan for reaching debt freedom if utilized.


The following will discuss the debt snowball, its benefits, its drawbacks, and why it may be better to use a different method when shedding consumer debt for good.
What is the Debt Snowball?


The debt snowball became after being featured in Dave Ramsey's book The Total Money Makeover. The idea is simple: you pay off your debts from smallest to largest until the last debt is paid off.

The smallest debt gets the largest payment, while the rest gets the minimum monthly amount owed. The idea is to throw as much money as you can at the smallest debt while still making your other minimum monthly payments. Once you pay off the first debt, you move on to the next smallest and repeat the process until all debt is gone.

Once you’ve paid off a debt, you can then reallocate that payment to your next smallest debt, and so on, until you’re able to throw a large amount of money at your larger debts. Your "snowball" will build so that you can make larger payments as you go along the process.

By the time you reach your last debt, with the largest balance, you will be able to focus the largest amount on paying down that debt as quickly as possible.

Benefits Most Stated for the Debt Snowball:

• The often-stated benefit of the debt snowball is that it helps people see progress and stay motivated, changing their behavior in the process. 
• Instead of seeing larger balances go down, you can pay off more debt balances faster by focusing on smaller debts first.
• That way, you see more "progress" faster, and seeing debt balances evaporate can help you to stay motivated on your debt-free journey.

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“The problem with your money is not your math. It’s the person in the mirror” is a quote from a debt snowball page on the Dave Ramsey site. But the question I have is, how does the debt snowball change the person in the mirror?

If getting debt-free is the primary goal, then I agree with this statement. I think it is definitely part of the journey, but it is not the destination. I also agree that behavior and emotions are often big issues when it comes to money problems. While the math may make sense, emotions often get in the way of rational decisions.

But does the debt snowball really help you change your behavior? First, let’s look at some drawbacks to the debt snowball method. Focusing on the Wrong ReasonsThe issue I have with the debt snowball is that it focuses on your feelings. You are trying to get smaller "wins" instead of looking at the big picture and ultimately what the debt snowball will cost you (which is more time and money).
But for most, aren’t "feelings" what got us into consumer debt in the first place?

The unfortunate truth is that if you don’t learn how to manage your feelings and act according to what your head knows to be true rather than what your heart wants to be true, you’re in danger of repeating the cycle and continuing to get out of debt.

Thus, getting out of debt isn’t really the ultimate goal in itself. Rather, it’s figuring out why the debt is there and figuring out ways to change any contributing behavior to avoid it in the future. That way, you prevent the past from going on repeat, and you set yourself up to tackle the next destination on your path to becoming independently wealthy or whatever your financial goals are.

It's about learning how to make smart financial decisions, even when it isn't what you feel like doing. Sacrificing the temporary satisfaction for things that are more permanent and valuable.

The Debt Snowball Goes Against Math:
Interest can either work for you or against you. But, especially when it comes to credit card interest, you’re losing money in a big way.

The amount you pay on credit card interest is money directly out of your pocket. If you don't pay off your balance, you will pay more on interest next month. It's the power of compound interest working against you.

Because of interest rates and the massive amounts of money you can lose to it, the debt snowball method usually results in you losing more money throughout the process.
Instead, a more sound method to handle debt is to pay off the credit cards or loans with the highest interest rates FIRST.

Every time you pay down a balance, you save money that could be going to interest that you can then use to pay down your debts. This process ultimately will allow you to get out of debt faster and saves you huge amounts of interest. If you have a tremendous amount of debt, this could also end up saving you a ton of money over the long haul.

Now, of course, it makes sense to pay off small debts that can be accomplished in a month or two. You could then use those payments toward other debt. However, focusing most of your money on the highest-interest debts will save you money and time on your journey.

This method has a fancy name too. It’s called the debt avalanche method. Does the debt avalanche method mean you don’t pay off full balances as quickly? Yes, it does. But the tradeoff is that you reduce the length of time it takes to pay off all debts due to cutting down on interest, as well as the money you would have paid toward interest had you let the balances sit longer. In this case, rather than the good feelings coming from “quick” wins, they come from paying off all debt earlier and saving more money in the process.

Does the Debt Snowball Really Change Your Behavior?
Again, the debt snowball is touted as a method that helps people change their behavior, but what behavior changes when you utilize the debt snowball?

Now, you may prevent yourself from going into more debt by staying on track using this method, which is good, but it does nothing about the reason behind the behavior. If you spend multiple years getting out of credit card debt, only to repeat the process, what good is the debt snowball?

From what I can tell, the only behavior changed by the debt snowball is how you are tackling your debt. And by implementing the debt snowball, you are almost guaranteed to have the debt longer and pay more on interest. That’s just the way the math works.

When You Might Consider Using the Debt Snowball
This article from Forbes compares the two debt payoff strategies. The general finding was that most people had an easier time sticking to a debt payoff plan when they focused on the smallest balances first.

For those people who have accrued massive amounts of debt, this makes sense. Most of them built up these debts based on emotion, so it makes sense that emotion would play a factor in motivating them to pay off or not pay off their balances.

Those steady little wins provide instant gratification, just like buying things you want even though you may not be able to afford them. If you are in a situation where you have a ton of debts to pay off, and you are looking at over 4-5 years to pay off these debts, you may look at implementing the debt snowball, at least for a time. Given that timeline and the amount of debt, some quick wins may help you stay motivated.

After all, 5+ years is an enormous amount of time for anyone to stick with any plan. Or maybe you look at the numbers, and in your scenario, the debt snowball isn't going to cost you that much in additional interest charges or time. That might be a great reason to go with the debt snowball.

How to Get Out of Debt for Good
When you’re drowning in debt, any method that helps you create a plan and focus on digging your way out is good. But, unfortunately, when you’re in that deep, it’s hard to focus on anything else. But life is more than just getting debt-free. It's about getting to a point where making money isn't holding you back from doing what you want to do with your time. That is the ultimate goal.

It's about learning to use money in ways that add to your life and not take from it. Of course, that's going to look different for everyone, but in all cases getting debt-free is only a stop in your journey.
Focusing on just the debt and nothing else can become a trap. You may be passionate about paying off your debts, and when that feeling fades, your old spending habits might resurface. Being passionate about an idea is not a bad thing. But what is more important is how this passion relates to your long-term money goals. 

You need to take some time and think: what are your long-term money goals? What do you ultimately hope to accomplish? What would make you happy? Identifying those goals is essential so that your debt payoff journey becomes just a step in your overall financial journey. With these larger goals in mind, you’ll be more motivated to examine how you got into debt and what changes you need to make to stay out of debt and beyond.

At times it can feel like we are always stressed out in trying to push towards something. But for each step we make towards our long-term goals, the more we will experience the fruit of our efforts.
Some things to keep in mind on your journey:

• Build and maintain a passion for the current short-term goal
• Be cognitive of long-term goals
• Think about the progress made up to this point
• Reflect on how it will feel to reach each destination on the journey
• Think about what you truly want out of life, and prioritize those things above everything

Implementing the Debt Snowball is Not Stupid. While I am advocating for using a different debt-payoff method, I want to be clear about one thing; those who use the debt snowball method are not bad or stupid. If you are paying off debt and are thinking about how the debt got there, that is a great thing, and I’m happy for you.

My goal with this article is to challenge the idea that the debt snowball is a magic pill that will solve all your money problems. The problem is usually much larger than the balances on your credit cards. And the debt snowball comes with an extra cost: time. The math is clear on this. It will take you longer to pay off your debts using the debt snowball method than if you focused on the highest interest rate debts first. You’ll also pay more over the course of debt payoff because you’re continuing to have higher balances on your highest interest rate debt.

But the most expensive aspect of having consumer debt is how much time it takes from your financial life. The longer you are in debt and obligated to pay these liabilities, the longer it will take you to be able to focus on saving, investing, and other things that enhance your life.

The more time you can get back, the faster you can arrive at each destination in your financial journey. Use how much you hate your debt as motivation to get it paid off. Your future self will thank you.

Final Thoughts
The debt snowball is often touted as a great method for getting out of debt. This method builds in small wins by paying off the smallest balances first.

While this method may help you stay motivated to pay off debt, it may also cost you time and money. You also risk repeating the cycle if you don’t reflect on why you got into debt in the first place and the behavior changes needed to remain debt-free. Instead, I suggest using the debt avalanche method, which involves paying off your highest interest debts first.
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In any case, thinking about what is going on behind your debt and how you can prevent the same scenario from happening in the future is the most important thing about your debt payoff strategy. On a general level, we (as humans) have a massive consumer debt problem, which will likely only get worse. Ensure you talk about the core issues behind the debt and figure out how you can live your best life to achieve your goals.
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Guest author: Tawnya Redding
Tawnya is an elementary special education teacher by day and co-blogger at Money Saved is Money Earned by night. She holds an Honors BS in Psychology from Oregon State University and an MS in Special Education from Portland State University. She has had a successful writing career, first as a writing tutor at the Oregon State University Writing Center, and in recent years, as a freelance writer. Tawnya and co-blogger Sebastian have a wealth of knowledge and information about personal finance, retirement, student loans, credit cards, and many other financial topics. They teach people how to save money, make money, and understand money.

Another great blog that may interest you on earning to pay off debt. Or you can check out this blog on making money on YouTube.

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