Scientists Say the Debt Snowball Method Works

2 Minute Read

The debt snowball has always been the core of Financial Peace University (FPU). Start with your smallest debt and pay it off as quickly as you can. Once it’s paid, roll that payment into your payment on the next highest balance. Repeat until you’re debt-free.

Many people have pointed out that it actually makes more mathematical sense tackle the debt with the highest interest rate first. But a recent study by two associate professors at Northwestern University’s Kellogg School of Management proves that getting out of debt isn’t about math—it’s about changing behavior.


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Forget Logic—It Just Works

The researchers examined the records of thousands of people enrolled in a credit-card debt settlement program and found that those who used the debt snowball approach were more likely to pay off all their debt. Even folks who paid a larger portion of their debt first were not as successful at ultimately eliminating their debt as those who started by paying off a higher number of smaller balances.

It’s true, the math doesn’t make sense … but if we had been paying attention to math, we wouldn’t be in debt.

As the study found—and as Dave has said for years—quick wins change behavior. When you pay off your smaller, nagging debts, you see the benefits instantly. Those quick wins motivate you to continue the behavior. Your wins keep adding up until you reach your goal of becoming debt-free.

Make It Work for You

The debt snowball is only the second of seven Baby Steps Dave teaches in FPU. Each Baby Step is built on the same idea: Small wins with money will lead to a long-term change in your money habits. Thousands of families have used this plan to dump millions of dollars in debt and change their financial futures forever.

Learn more about the Baby Steps in an FPU class near you.

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