What’s a Debt Snowball?

Snowball Recently I started listening to some financial radio programs on my iPod, and
I learned a term that I’d never heard before: debt snowball.

A debt snowball is apparently a method of paying down all your debt, starting
with the smallest balances and working your way up to the biggest. If you were
to commit to this technique, you’d do the following:

- Make a list of all your debts. Put them in order by size.
- Plan to pay the minimum on every balance.
- If you have extra money to throw toward your debts each month, put it
toward the smallest one first.
- Once the smallest balance has been knocked out, take the money you were
putting toward it and direct it toward the next smallest debt, on top of what
you were already paying.

The idea, of course, is that as you pay off your smaller debts, the money you
can put toward the next debt gets bigger—much like a snowball rolling downhill.
And as your smaller debts disappear, there’s a psychological boost from seeing
them go, making you even more determined to keep paying off the rest of what you

This process seems to work for an awful lot of people, even though it goes
against the conventional pay-off-the-highest-interest-rate-debt wisdom.

Have you ever tried this approach? Did it work for you?