Snowballing: A winning debt reduction strategy!

Debt over headAt various points in our lives, many of us find ourselves in over our heads with revolving credit card and consumer debt.  As many know too well, it can happen quickly without good discipline and an effective budget.  Between eating out, a new piece of furniture here, unexpected medical or auto expenses there, or perhaps even a new car payment, things can get out of hand and catch one by surprise so quickly!  Don’t feel alone!

Fortunately, there is a viable solution that will work with a few sacrifices to achieve the goal.  Both personal and family discipline is required to achieve the final objective of paying off your debts.

The Snowball method of debt reduction is advocated by many financial and wealth experts, including financial talk-show host Dave Ramsey.  “Snowballing” involves good budgeting and planned regular payments to credit cards, dedicated retailer credit cards, auto loans, etc.

Snowball RollingUsing “Snowballing,” extra cash that an indebted individual or family can regularly set aside is dedicated to paying debts, beginning with the smallest debt owed.  As each smaller debt is repaid completely, the money used to pay on that debt is then rolled forward and applied toward making additional payments on the next smallest debt and so forth until the entire debt load is paid off in full.  During the process, the minimum repayment requirements of each debtor are also maintained.

The primary benefit of paying the smallest balances first is the psychological benefit of experiencing visible results sooner.  The number of creditors owed will shrink more quickly, the number of bills one receives in the mail will begin to fall off, and the debt load will decline exponentially …like a snow ball!  Talk show host Dave Ramsey recognizes that most consumers trying to reduce debt need the “quick wins” provided by Snowballing.  There are times when the calculations prove that other strategies might be slightly more cost effective, but the advantages are minimal and none provide the simplicity and positive mental vibes of realizing one’s debt reduction achievements like Snowballing.

stepsTo implement the strategy, here are the basic steps:

  • List all debts in ascending order from smallest balance to largest.
  • Commit to pay the minimum payment on every debt.
  • Determine how much extra money can be applied towards the smallest debt.
  • Pay the minimum payment plus the extra amount towards that smallest debt until it is paid off. (Contact your vendors and direct that extra payments are to go directly toward principal reduction.)
  • Once a specific debt is paid in full, add the old debt’s minimum payment plus the extra amount previously paid toward the first debt to the minimum payment on the second smallest debt. Apply the new sum to repaying the second smallest debt.
  • Repeat the process until all debts are paid in full.
    (Thanks to Wikipedia!)

Snowballing will only work for those with high enough incomes and the necessary resources to meet all of the minimum repayment requirements on their debts and the ability to budget for some additional resources.

An effective Excel-based “Snowballing Debt Reduction Calculator” can be found at:

Happy snowball trails to a debt-free existence!


Kent Couch is the Principal Partner at Paraclete Ventures LLC, a Daily Money Management firm serving Seniors and Busy Professionals in the Arlington, Mansfield and Tarrant County, Texas area.

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