The debt snowball works because it’s all about behavior modification, not math. When it all boils down, hope has more to do with this equation than math ever will.
If you start paying on the student loan first because it’s the largest debt, you won’t get rid of it for a while. You’ll see numbers going down on the balance, but pretty soon you’ll lose steam and stop paying extra. Why? Because it’s taking forever to get a win! And you’ll still have all your other small, annoying debts hanging around too.
But when you ditch the smallest debt first, you see progress—quickly! You have hope! That debt is out of your life forever. The second debt will soon follow and then the next. When you see the plan working, you’re more likely to feel like you can stick it out. And when you keep at it, you’ll succeed in becoming debt-free!
By the time you’re paying on the bigger debts, you have so much cash freed up from paying off the earlier ones that it creates a debt snowball. Suddenly, you’re putting hundreds of dollars a month toward your debts instead of slowly chipping away at them with minimum payments. You build momentum, and that changes your behavior and helps you get out of debt for good.