Snowball Method

What is the Snowball Method?

The debt snowball method is a debt payoff strategy popularized by Dave Ramsey. You pay off debts in order from smallest balance to largest, regardless of interest rate. This creates quick wins that build momentum and motivation.

How It Works

1. List all your debts from smallest balance to largest

2. Make minimum payments on all debts except the smallest

3. Put all extra money toward the smallest debt

4. Once the smallest debt is paid off, roll that payment into the next smallest

5. Repeat until all debts are paid off

Example

Say you have three debts:

• Credit Card A: $500 balance

• Credit Card B: $2,000 balance

• Auto Loan: $8,000 balance

With the snowball method, you would focus all extra payments on Credit Card A first. Once it is paid off, you add what you were paying on it to your Credit Card B payment. This creates a snowball effect where your payments grow larger as you eliminate each debt.

Pros and Cons

Advantages

• Quick wins keep you motivated

• Simple to understand and follow

• Psychologically rewarding to eliminate debts faster

• Reduces number of monthly payments quickly

Disadvantages

• May pay more in total interest than avalanche method

• Not mathematically optimal

Using Snowball in BeDebtFree

BeDebtFree makes it easy to use the snowball method. Simply select Snowball as your payoff strategy, and your debts will automatically be ordered from smallest to largest balance. The app calculates your optimal payment allocation each month.