What the Debt-Snowball Method Has to Do with Personal Productivity

The debt-snowball method is a strategy developed by Dave Ramsey, author of the book The Total Money Makeover, which aims to eliminate personal debts. It basically consists on cancelling first the lowest debt providing minimal payments to the rest of the debt. Once you have cancelled the lowest debt, you can concentrate in the next one with the smallest amount owed, and so on.

According to this strategy, if you have a $100.000 mortgage, a $15.000 personal loan, $1.200 expenses in your credit card A, $450 expenses in your credit card B and a pending gym receipt of $80, you should focus on paying off the $80 receipt, making minimal payments to the rest of your debts. After that, you should concentrate in cancelling the $450 debt you have in your credit card B.

If you think about it, this approach is against all financial logic. Any economist would advise you to first cancel those debts that, regardless their quantity, generate more interests. By doing so the debts will grow less through time and your money usage will be more efficient.

However, what’s behind the “snowball” strategy has little to do with efficiency and much to do with certain psychological principles which affect human behavior. This is why it usually works better than any other for many people.

When investing every available dollar to face the debt of minor quantity, you can cross out that debt relatively quickly of the debt list, having more cash to deal with the next debt.

When achieving small and quick wins your motivation increases and that’s very important. If you worry first about the big debts, you can easily feel impotent when facing the huge amount of accumulated debt. Facing small debts and eliminating them quickly from the list allows you to win a battle and realize that you are able to win the war. Sometimes it’s more important to follow human nature than pure logic.

A similar situation can happen in a context of personal productivity. You may have reached a point where the debt is so big (too many tasks and projects you need to complete) and so overwhelming that you feel lost.

In this case, it’s possible that the debt-snowball method helps you finding enough motivation to put everything in order again ¹. Once you have attended all mandatory issues of the day, spend the remaining time confronting the smaller tasks and completing the projects that can be finished earlier. Check off, check off and check off!

If you face a huge and intimidating task, you need to fragment such task. Reduce the problem’s dimension and make it small enough to achieve a victory as soon as possible.

Once you have taken back control of your life and you feel motivated enough, you can start to think again in a logical and effective way. Now you are able to prioritize efficiency to any other criteria for getting things done.

¹ Note: As any approach based on psychological or cognitive studies, it works well with certain types of people, but not with everyone. In any case, I believe it’s not a waste of time knowing more or less subconscious aspects that can affect the way in which we make decisions.