Snowball Method: A simple way to get motivated to pay off debt

There are many types of debt, from a note owed on a house or a car to student loans to credit card balances to predatory payday loans. Not all debt is created equally. Some debts, paid consistently, like a student loan or mortgage can actually help your credit score.

Only 25% of Americans live totally debt free. And 340 million have some form of debt. But around 60 million Americans are in severe debt including those with high interest rates. It's important to get that debt under control. That's where Dave Ramsey's Snowball method comes in.

Dave Ramsey is an American financial author, radio host, and motivational speaker. He wrote "The Total Money Makeover," which outlines his 7 Baby Steps plan for achieving financial freedom. He popularized what he termed 'the snowball method' of paying off debt.

The snowball method is a debt repayment strategy involving paying off debts in order from smallest to largest balance, regardless of interest rate. The idea is to start with small victories by paying off smaller debts first, which provides motivation for tackling bigger debts.

It's simple: 1. List all of your debts smallest to largest balance. 2. Make the minimum payments on all debts except the smallest one. 3. Apply any extra money you have towards paying off the smallest debt. 4. Once paid off, move on to the next smallest until they're all paid off

Snowballing is appealing to many people because it provides a sense of progress as debts are paid off one by one. This, in turn, can lead to greater discipline in sticking to a debt repayment plan. It's great for those feeling defeated or who don't know where to start.

But there are drawbacks. It may not be the best option if you have high-interest debts. Any interest rate over 8% is 'high.' If you have this type of debt, the interest that accrues can wipe out any progress you make and extend the time it takes to repay everything.

Snowballing can make individuals feel empowered in a detrimental way--that is as you pay off small debts and feel less stressed, you feel ok to take on new debt and simply put it in the back of the line to be paid off. Snowballing doesn't address the underlying spending issue.

It also by default assumes that you can at least make minimum payments. If you are unable to make minimum payments, much less have extra money to pay off the debts--the interest is compounded by penalties creating a seemingly insurmountable mountain of debt.

The snowball method is a good choice if you are struggling with motivation and need a simple, straightforward plan to help you get started. It's best for those with several low interest debts. It can fail if you have high interest debt or need to feel pressure to pay them off.