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I really like the various methods of debt elimination, cumulatively know as the Debt Snowball, to get rid of debt. But there are different flavors and varieties that fit different needs. This series will examine the three most popular forms of the debt snowball, their advocates, and my experience using each.

1. Lowest Balance First (advocated by Dave Ramsey)
2. Dead on Last Payment (aka: DOLP, advocated by David Bach)
3. Highest Interest Rates First

Today we’ll focus on the Lowest Balance First snowball. First a short intro; If you’re seriously trying to get out of debt, you’ve already heard of Dave Ramsey, and if you haven’t, you aren’t SERIOUSLY trying to get out of debt. Dave is a strong-talking, no-holds-barred advocate of people getting completely out of debt. His decades of experience mentoring people to get rid of debt with such statements as “The borrower is slave to the lender” and the screaming of his followers “I’m/we’re Debt Free!!” is inspiring on a visceral level. Love him or hate him, he’s absolutely determined to get you out of debt. To accomplish this, he advocates a debt snowball that orders all the bills in a smallest bill first sequence.

The Lowest Balance First snowball works as follows;

1) Take all your bills, subtract all the ones w/o ends (utilities, etc) and list them, from lowest balance to highest.

2) Pay the minimums on all the bills except the first, and pay as MUCH as you can on that one until it’s gone.

3) Continue to the second bill, adding the amount you paid on the first before it was paid off and pay that one,

4) Lather, rinse, repeat,.. and so on down the list of bills until the last bill is gone.

Then (optional, but highly recommended),

5) Call the Dave Ramsey show and give the”We’re Debt Free!!” scream.

Pros:

• Easy to set up.
• Easy to follow.
• Quick results.

Cons:

• Overall, more interest paid with this method than others.

Overall: The Dave Ramsey debt snowball, as Dave himself has said numerous times, isn’t about the math. It’s about the forming of a habit of paying off debt. It reinforces the habit by giving early positive feedback that people might not get with the DOLP snowball or the High Interest snowball. The whole point of the program is to stay on it, and this early reinforcement helps those just starting out to do just that. This is the snowball for those just getting their act together. It’s easy to put together, easy to stay on, and just plain easy to explain. The extra interest paid over the life of the plan is minimal, and is more than made up for if the simplicity of the plan causes people to follow through with it.

An additional recommendation though, would be to re-assess your situation after 6 months to a year after being on the plan and deciding whether to continue on as-is, or to switch to one of the other two debt snowballs to save some interest. After about 6 months, the paying off of bills has moved from an impulse (1-2 months), to a habit (3-5 months) and finally to a lifestyle (6 months+) so hopefully there should be little chance of falling back into the habits that caused the indebtedness to begin with.

On a side note, Thanks Dave for all the hard work you’ve performed over the years. One man CAN and DOES make a difference.

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