Dave Ramsey Debt Snowball Calculator

Debt Snowball Method:

\[ \text{Payoff Time} = \sum_{i=1}^{n} \left( \frac{\text{Debt}_i}{\text{Extra Payment}} \right) \text{ from smallest to largest balance} + \text{minimum payments} \]

Payoff Time:

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1. What is the Debt Snowball Method?

The debt snowball method is a debt reduction strategy where you pay off debts from smallest to largest, gaining momentum as each balance is paid off. Popularized by Dave Ramsey, this method provides psychological wins to keep you motivated.

2. How Does the Calculator Work?

The calculator uses the debt snowball formula:

\[ \text{Payoff Time} = \sum_{i=1}^{n} \left( \frac{\text{Debt}_i}{\text{Extra Payment}} \right) \text{ from smallest to largest balance} + \text{minimum payments} \]

Where:

\( \text{Debt}_i \) — Individual debt amounts
\( \text{Extra Payment} \) — Additional monthly payment beyond minimums
Minimum payments — Required monthly payments for each debt

Explanation: The calculator sorts debts from smallest to largest, applies extra payments to the smallest debt first while making minimum payments on others, then rolls over payments to the next debt when one is paid off.

3. Importance of Debt Snowball

Details: This method provides quick wins that help maintain motivation. While not mathematically optimal (the avalanche method saves more interest), the snowball method has higher success rates for many people.

4. Using the Calculator

Tips: Enter all debts (comma separated), their corresponding minimum payments, and your extra monthly payment amount. The calculator will show how many months until complete payoff.

5. Frequently Asked Questions (FAQ)

Q1: Why pay smallest debts first instead of highest interest?
A: The psychological wins of paying off entire debts quickly help maintain motivation, leading to higher success rates despite potentially paying more interest.

Q2: What if I have extra money one month?
A: Apply all extra money to the current smallest debt in the snowball, regardless of interest rates.

Q3: Should I stop retirement contributions while snowballing?
A: Dave Ramsey recommends pausing all investments (except 401k matches) until all debt except mortgage is paid off.

Q4: What about credit card rewards?
A: The snowball method requires stopping all credit card use to avoid new debt, making rewards irrelevant.

Q5: How accurate is this calculator?
A: It provides a good estimate but actual payoff may vary based on interest accrual and payment timing.