Claim 5 of 22
Debt snowball: pay off the smallest debt first
Is paying the smallest debt first worth what it costs?
Verdict
Holds with conditions
The arithmetic favours the highest rate first in every country, and the support for the smallest-balance-first order is behavioural: one observational study of real debt (Gal and McShane) and one lab task (Brown and Lahey), while a third study (Amar and co-authors) found that people tend to pay small debts first, at a cost, and that prompts about accumulated interest helped. The smallest-first order is defensible where early wins are likely to decide whether the borrower keeps going (inference by this audit), and the example prices what it costs at official 2026 rates.
The cost, from the book's own figures. The extra interest that the example shows the snowball order costing is $126 in the United States, £135 in the United Kingdom and A$98 in Australia, and in the United States the smallest-first order also took one month longer to clear all three debts (25 against 24).
Made by: Ramsey (two titles).
Test it on your own numbers
- United States: CFPB, How to reduce your debt (consumerfinance.gov/archive/blog/how-reduce-your-debt), to compare the snowball and highest-rate orders on your own debts.
- United Kingdom: MoneyHelper, Pay off debt, save or invest first? (moneyhelper.org.uk/en/blog/debt-help/pay-off-debt-save-or-invest-first), to check which of your debts to pay first and why.
- Australia: Moneysmart, credit card calculator (moneysmart.gov.au/credit-cards/credit-card-calculator), to see how much time and money a higher repayment saves.
The full test, with every figure dated and sourced, is in chapter 5 of the book.