Everybody has an opinion and there certainly are many different ways to tackle debt. People work in different ways and have different rhymes and rhythms, but across all of the debt elimination methods, using the debt snowball provides the best situation to succeed. Sure, there are other options such as the debt avalanche or even spreading your funds across the entire body of your debt, but here are three main reasons as to why the debt snowball is the most effective method in eliminating debt.
Tangible Results
When using the debt snowball, you are able to see quick tangible results. For anyone reading who does not know how the debt snowball works, it is very simple. You arrange your debt in order from smallest to largest and begin allocating every bit of extra cash to the smallest debt, eliminating it as quickly as possible. The interest rates do not matter because the goal here is to eliminate debt, not save money while eliminating debt.
The quick tangible results are realized when you pay off the smallest debt first. Completing this will give you a feeling of success and motivation to continue on. Whereas if you start from the largest debt, it will take a long time and this could discourage people because they are not seeing their debt be eliminated. Staying focused and motivated is key, and using the snowball method certainly feeds those two criteria.
Learning New Habits
Falling into debt is very easy to do, and for some, it has become a habit to pull out the credit card for purchases. The debt snowball allows the tangible results we talked about to slowly change habits. Similar to training an animal, there has to be a reward for the positive actions, and starting with the smallest debt allows for positivity because you can see that debt shrink and be eliminated much quicker than any of the other debts methods.
It is not enough to learn habits of paying off debt; you also have to refine other aspects of personal finance such as saving and budgeting. Budgets and savings are something that will be discussed in greater detail in a different article, but they are a critical part in debt elimination, and using the debt snowball allows for the greatest amount of focus on these aspects.
No Muss No Fuss
My last reason for promoting the snowball method over all of the other debt elimination methods is it is a no-hassle way to begin effectively eliminating debt. A popular counter-argument is that the interest rates should be put in order because you’ll save money. Yes, that is a valid point, but we are here to eliminate debt in an effective manner while changing your personal finance habits. By arranging your debts in smallest to largest order, it keeps it very simple and makes the process more approachable by all.
I hope this has inspired you to take a look at your personal finance picture and begin making the necessary adjustments to begin your journey to financial freedom. Debt is something you should not be embarrassed about, but rather embrace the reality of the situation and make that change. Proverbs 22:7, “The rich rule over the poor, and the borrower is slave to the lender.”
-Nathan Y.
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