The Fatal Flaw With the Dave Ramsey Snowball Method

Hubby and I have been using the Dave Ramsey endorsed Debt-Snowball method over the past few years.

The debt-snowball method is a debt reduction strategy, whereby one who owes on more than one account pays off the accounts starting with the smallest balances first while paying the minimum on larger debts. Once the smallest debt is paid off, one proceeds to the next slightly larger small debt above that, so on and so forth, gradually proceeding to the larger ones later

I had the usual assortment of debts most college grads leave with; a couple small store credit cards, one larger credit card, a car loan and student loans of a couple flavors. I did some research and talked him into the plan.

Mostly, I have to admit, the method worked. I’ve always been a good with budgets, so figuring out our financial starting point and figuring out where our money was going was pretty easy. We did real well for the first 3 months, then we found out we were pregnant. Immediately we had to go back to step one of Dave’s Baby Steps and double our emergency savings from 1K to 2K to handle the medical bills. After baby #1 we got back on the debt snowball for a year and a half. Then we found out we were expecting baby #2, and we’d switched to an HSA health plan. With that health plan we knew we’d pay the first 4K in hospital bills, so once again we had to back to Baby Step #1 and build up our emergency savings, this time diverting most of the build up to the HSA account. Some had to go to the emergency savings that we keep in cash on hand, to prep for the 2 month maternity leave with no pay.  Needless to say, the snowball was obliterated.

Finally, back to work after baby, checks rolling in, utility bill pulled back from the brink of shutoff, we got back on the Snowball method. In our first couple of goes, we’d eliminate all of the store cards, the Federal Student Loans and about half of the credit card, and just from time elapsed and regular minimum payments, the car loan was getting close to done.  So we focused on that credit card and car loan and got them paid. That left only my Obscenely Bloated Private Student Loans.

The problem is, the past couple of months, the car has been paid off, the other debts are gone, but we weren’t coming up with all that extra money to throw at the OBPSL. So, like the geek I am, I went to the checking account and compared numbers for the past few months on all of our spending categories.

Pretty much every other cost is increasing. Maintenance on the car, it’s a decade old now with over 200K on the odometer. My mechanic was warning me last time that the timing belt will probably be the next thing up for repair. Plus, saving for a new car, sure we have our emergency buffer savings, but it can’t be the emergency buffer savings AND the down payment or total payment for a new car. Right? So there goes part of our snowball.

That emergency savings is also not going to handle any sort of retirement, and I’ve passed the 30 mark, so I’ve had to start throwing money down that pit. Why are all 401K’s stock market based? Am I really the only one convinced we’re going to lose it all in some inevitable stock market collapse when the empire can’t grow anymore? That’s another post though.

The biggest thing was our grocery bills. I thought, no way. I garden, a LOT! We cook from scratch, like flour and eggs and stuff pulled from the ground 5 minutes ago scratch.  And we were still blowing our food budget out of the water. All of our snowball was going there. And then it hit me, when we made that food budget, it was two adults and one baby.  Now we have 2 little boys who eat their weight in fruit and yogurt and milk and butter and cheese and two adults. I took my search online to see what a reasonable budget would be for a family of four. Wouldn’t you know it, that’s a common question and there are monthly reports put out detailing that sort of information.  Really intriguing if you want to see where you fall on the bell curve. Sept 2013 Report.

So, there it is, my super intuitive insight into the Dave Ramsey Snowball method. It works until the rising costs of other things wipe out your snowball. Whether that’s food or health care or housing.

That said, of course we’re better off in general for having done it, and maybe we just didn’t have enough debts to really see the full benefits. We’re looking for creative ways to bring down our costs in other areas, maybe we can rebuild the snowball from other sources.  How is your debt payment going? Got a great strategy or tip? Shout out in the comments!

– Calamity Jane

34 comments… add one
  • j.r. guerra in s. tx. November 21, 2013, 7:49 am

    Yep, the kids sure can put it away. I have a pair of teenagers, the boy who is not slim but not obese, can eat two double meat hamburgers (no fries) and a glass of water and not have a problem. $10 just for that. My daughter is not far behind. So our 4 family members eat for about $40 at the ‘good’ places, $25 is about as low as it gets. Pick eaters, the pair of them. I don’t know where I went wrong :^), I can eat steak or baloney sandwich, both without any regrets.


    Also consider the quantities of foods are also packaged less for more cost. All in all, not a good equation.

    Growing your own produce and meat sounds like a really good idea.

  • SD3 November 21, 2013, 9:11 am

    ” It works until the rising costs of other things wipe out your snowball.”

    All the more reason to not go into debt in the first place, eh?

  • farmgirl November 21, 2013, 10:38 am

    I couldn’t count the times we’ve gotten all the bills paid off, and then some major catastrophe happens. It’s life. Without fail as soon as one car is paid off, the other one will die. Or the tractor. Or the year we had, to quote the repairman, a “catastrophic failure” of our air conditioning during the summer when it was 110 every single day. The entire central heat and air was 30 years old so we replaced the whole thing, which of course required a loan.
    Between my husband and I, we have 7 kids. Someone is always graduating, needing a car, getting married, going off to college or having a baby. We are always expected to do our part to make those things happen.
    Budget? Money? With kids?

  • ThatguyinCA November 21, 2013, 11:47 am

    It’s not really a flaw of his method. It’s just life happening to you. If choices you make eat into your snowball, that’s not a fault of the Ramsey system.

    The Ramsey method works. Life just makes it so it doesn’t work out the way you have it on paper.

    Keep plugging away you’ll get there.

    • poorman December 4, 2013, 10:51 am

      I agree. The method was working though in my opinion you head for the bills with the highest interest first. There is no sense paying off a smaller bill with low interest if doing the min payment on a large bill is adding more to the total. The problem as I see it was you kept adding bills IE children and hospital bills. If you had waited to have children( and yes you can wait till they can be afforded) you would have put yourself and the children in a better situation.

      • Calamity Jane December 5, 2013, 8:00 am

        lol in theory, yes children can wait. In real life though, birth control often fails. We were on birth control when we got pregnant, both times. My little sister was born AFTER my mother’s tubes were tied. Not sure if my family is just super fertile or super unlucky. :-D

  • Pineslayer November 21, 2013, 11:52 am

    Sounds like it’s time for a sports analogy. Can you hit a curve ball?
    A curve ball made of slush. Life tends to get in the way of our dreams and hopes sometimes. Besides going without any frills, like internet, store bought libations, and other non-essentials, you just keep swinging. I am a firm believer in avoiding Market based savings plans. The overlords are going to rob you blind at some point, but they have set up the system so that it looks like the best investment. We have been dumping $ into a normal savings account for the college fund. It doesn’t pay much, but it is not susceptible to downturns and we can get to it quickly in an emergency. When you look at the rate of inflation vs. what interest you earn it is still losing purchasing power. Pick your poison. I am investing in tangible assets more than saving due to my belief that we are going to be f*+k’d by the overlords and my meager savings will be absorbed by someone other than us. It is so hard to have faith that things will get better and that we will be able to have a cushy “retirement”, whatever that means. Now that my blood pressure is spiking, I’m going outside, 18 degrees and light snow.

  • GoneWithTheWind November 21, 2013, 4:07 pm

    Do not take out student loans. I worked for a college and I noticed everyone would always get the maximum loan they could get. This was true regardless of their tuition costs. Young people tended to think of it as “free” money. They would spend it on an apartment rather then live at home or on a car or spring break vacations or simply partying. Find some other way to pay for school. Student loans are a trap.

  • Bear November 21, 2013, 4:11 pm

    The Clark Howard method is pay off the highest interest debt first. Then on down the line. Hopefully it’s a short line. If you can swing it what your monthly payment was on the high interest debt you paid off, put that towards the next in line and so on. It will save money in interest. The idea of paying lowest debt to highest debt feels like you are accomplishing it in steps that you see in a more pronounced but over all you still pay more interest and takes longer. I hope I made sense.

    • Anonymous November 21, 2013, 8:25 pm

      That’s what I would do. Regardless of the amount of debt, it’s a little counterproductive to pay off a small debt while a larger and higher interest debt grows.

    • ThatguyinCA November 22, 2013, 11:49 am

      Either works well. The Ramsey method does not pay the smallest interest first, it’s the smallest balance. It doesn’t take interest into account. If all your balances are within 2-3% of each other then the Ramsey method works just as well and is the better method from a flexibility standpoint. I did a spreadsheet calculation of the Ramsey method vs. paying our highest first and the costs differences were minimal. The benefit of the Ramsey method is you free up money faster. Meaning you eliminate one payment on something quicker, which gives you a little more financial flexibility. Although the plan is to load that “retired” payment onto the payment of the next debt in line, the flexibility can come in handy.

      As for time, it didn’t take much longer based on my calculation (same total payment amount each month; one method highest rate to lowest, the other method, lowest balance to biggest balance) and the total costs of not ordering payments by highest interest to lowest was less than $200 total 0ver a 3 year period. This was with four different balances totaling aprox $40K (two were car loans). In cases where the balances were close, we chose the car payment over the credit card. Because: 1.) when a car is paid off, you can alter your insurance coverage and save more money, 2.) Car payments are a higher monthly payment for the same balance than a credit card is, so eliminating them over the credit card allowed a greater flexibility, 3.) they can reposses your car if you fail to pay/fall behind, credit cards can just call once a day.

      No method is the perfect one. But, you should start payment order using the Ramsey method, then do the following; move up to the front any balance where the rate is greater than the rest by 5% or more then when a car and a credit card are close in balance, always put cars ahead of credit cards (but only when close in balance).

      This whole post was about life creating the need for flexibility. That’s the strength of the “ThatguyinCA method.” It’s working for me (slowly but surely).

      • ThatguyinCA November 22, 2013, 11:51 am

        What I meant in the 3rd sentence is if all your balances have rates within 3% of each other, not overall balances.

      • poorman December 4, 2013, 10:58 am

        OK maybe its just me but if you are paying say 700.00 a month towards these bills and as they are payed off you still pay 700.00 a month how is this giving you more flexibility? Paying the higher interest ones first pays them off faster period. You are cutting down the amount that they grow that way. That’s just simple math. And in my opinion 200.00 is 200.00 that would pay my grocery bill 1 week each of those years.

  • R.C. November 21, 2013, 5:00 pm

    I know that this will likely meet some moans and groans, but have you considered when you go out to eat, places like buffets? I realize that some are turned off, but think about this, what other place can you go, where your kids will pick anything they like to eat, and stuff their gourds? LOL Buffets typically cost slightly more because they offer all-you-can-eat meals, but I have yet to meet someone who didn’t need a wheelbarrow to leave one of these places :)

    Irregardless, I have a family of 3, we rarely eat out, and that is tough to do. We cook all of our meals, not the frozen pizza types (but I have my favorites lol), but that budget per month is increasing.

    We have cut costs by purchasing or raising animals for slaughter. Getting it from a farmer and processing it we have spent $1.70/lb pork (including bacon, sausage, etc) when most pork products are $3-6/lb based on the cut of meat.

    There are cost savings out there, you just need to look less at the grocery store (which most of you are), and look to your farmers. Gardening gets you only so far. :)

  • Planner32 November 21, 2013, 5:11 pm

    I suggest you attend Financial Peace University. The snowball doesn’t work all by itself. You have to put the whole system into place. One thing you mention was retirement. If you follow Dave’s plan, you shouldn’t be putting money away for retirement until you have the debt paid off. It is called sacrifice for a reason. You sacrifice every non-essential and make do with less at every opportunity until it is all paid off except the house. Then you start investing again, and loosen the belt just a little. Millions of families have done it, including mine. It’s not easy, but it works, and it is so worth it when you get done!

    • ThatguyinCA November 22, 2013, 12:04 pm

      I concur.

  • jimmy November 21, 2013, 5:12 pm

    when we get a chance to use others peoples money for free we take advantage of it. For example:
    we also had to replace the a/c unit last year. The company offered free financing for a year so we took advantage, instead of wiping out our meager savings. The key is to pay in full before the free interest period ends otherwise they hammer you very hard. Another example is credit cards offering zero interest for a year on transfers. In the past we just kept transferring the balance to a new card, close the old account. We were able to pay off all cards using this method.

    We’ve also found the lowest interst for all types of loans at the local credit union.

    • ThatguyinCA November 22, 2013, 12:10 pm

      Credit unions are the way to go.

      The 0% interest transfer juggling act isn’t a bad idea if: 1.) you are organized and ONLY transfer what you will pay off in the 0% interest (cause after that the interest rate is usually higher than the card you are transferring from) and you never know when the next offer will come in 2.) don’t care about your credit rating (opening and closing accounts repeatedly actually dings your credit).

      0% interest offers are actually far fewer these days than they used to be.

      • jimmy November 22, 2013, 3:22 pm

        the transferring of card balancing did not have a negative effect on my rating, actually the opposite because I was able to pay more than the minimum due. think about it

        • ThatguyinCA November 25, 2013, 11:31 am

          The constant opening and closing of accounts does have an adverse affect on your credit rating as stupid as that sounds. Things in life don’t alwasy follow common sense. Google it, you’ll find A LOT of data about it.

  • Michelle November 21, 2013, 6:03 pm

    I like Dave Ramsey, but what can he really do in the face of the collapse of the dollar? The only people who had anything left after the collapse of the currency in Argentina and Greece were the ones holding equities.

    The scariest thing will be what the government will do when the SHTF, I got my bugout group ready. In case you dont have one, I suggest using this prepper/survivalist card game to help you build a bugout group without putting yourself too much out there. Its Xmas season, you cant go wrong with this deck. I love it.

  • EZE November 21, 2013, 7:07 pm

    We’ve been all over crazy Dave & his $$ plans…1st home paid in 1yr 9months, Wifes college paid in 9 months, second mortgage paid off in 6 years, just paid cash for 2 nice 2009 vehicles, the secret…no kids. WTH do we want to raise kids in todays world for? Too many Zombies to guard against!

  • Anonymous November 21, 2013, 11:12 pm

    if anything, this post proves the Ramsey system works. You had the emergency $ available for rising costs and babies… BECAUSE its an early baby step.

    Compare where you are TODAY with where you’d be if you hadn’t started the Ramsey steps. Seriously, what would today look like in comparison?

  • irishdutchuncle November 22, 2013, 5:31 am

    I’ve heard bits of his radio program, and liked what I heard:
    if you want a tax deduction, donating to charity beats mortgage interest. also he echoed something that older co-workers had told me years before: your house is not “an investment”, it’s shelter.
    if you someday sell it for more than you paid, that’s a bonus.

    being in debt really stinks. keep fighting it, because you will like it even less the closer you get to “retirement age”.

  • Grandma Bear November 22, 2013, 1:15 pm

    You are still so much better off having a plan and working the plan. It is peace of mind to know where you are going and how to get there. As for grocery prices and insurance prices going up, there is so little that is in our power. I am tempted to not have insurance at all and hope for the best, but that is not practical or smart! As for groceries, buy on sale, can, dry and grow. Life is not easy but would you really want it to be? I count everyday as a blessing from above for without hope life would truly be a burden. In my life the children and grandchilden are the blessing, everything else is just material. Material things can be replaced, lives cannot. We are all in this together, we will survive and thrive!

  • EagertoLearn November 23, 2013, 8:44 am

    No. I reread you post twice……….You and hubby did good…………..

    Can’t help when unexpected things happen in life………..

    Well disciplined young people……………..


  • irishdutchuncle November 23, 2013, 3:28 pm

    … and change out that timing belt, or trade in the car.
    these days that’s usually a catastrophic failure if it happens: valves contact pistons.

    • Calamity Jane December 5, 2013, 8:15 am

      Thanks Irish, we’re considering trading in for something newer. But trying to balance that decision against the debt we still have and the savings that is still quite meager, and the nearly 40 mpg we still get with the old Civic.

      • irishdutchuncle December 8, 2013, 7:06 pm

        by all means keep the Civic, then.
        my daily driver jalopy turned thirty this year. (because I like driving it, and can do many of my own repairs)
        my mileage isn’t nearly that good, however.
        all I’m saying is to not neglect the timing belt…
        (I have had two of them fail, way back when it didn’t wreck the engine. much easier to replace a timing belt in a warm, well lit garage than in a parking lot by flashlight)

  • Cliffystones November 23, 2013, 4:03 pm

    Since none of the other comments have mentioned these, here are a few ways I’ve learned to spend less over the years.

    Taking care of and maintaining the “stuff” I already own. Everything from auto maintainence to oiling a squeaky door hinge to touching up outdoor paint helps to keep a mole-hill from turning into Mt. Everest. And there’s so much information at the touch of a button on repairing almost anything. I know you mentioned your mechanic. If he’s good and trustworthy treat him well. But even things like toasters and coffee makers might be repairable. I just do a search on the make, model and problem I’m having. Sometimes it’s an easy fix, sometimes I confirm it’s time for the scrap heap. But it never hurts to find out. Anytime a $2 fix saves having to spend $50 you’ll feel real good :).

    Lastly if you can, avoid buying the latest and greatest technology. That new XBox just came out, and my 17yo son was angling for me to get one. $500! I’m like “yip,yip,yip, dit,dit,dit, get a job boy!” I figure after the New Year they will drop at least $100.

  • leal November 24, 2013, 6:55 pm

    Four years ago, I owed $32K in debt. I took Ramsey’s FPU. I decided to take the class again this year just as a refresher. I dug out the book and found a piece of paper in it showing what I owed in 2009. This year, I only owe $5K . I used the debt snowball system with a twist. I had set up an account with a credit union at work, had money going there to build my emergency fund. I just let it go as it was “out of sight, out of mind”. Approximately every 3 months, I checked the balance on the account and withdrew all but my $1K emergency fund. I then used that withdrawn money to pay on the debt with the largest interest rate. I was a bit shocked at how much debt I had paid off. Then I did an interesting thing: I dug through my filing cabinet and found a bill from each of my listed debts. I figure I saved myself (over 4 years and just paying minimum on all) several thousands of dollars. Any budgeting system should be used as a guideline – I did start with the smallest debt but when I withdrew extra money from the CU, I applied that to the highest interest rate accounts.

  • Preacher November 25, 2013, 10:10 am

    I used that method with great success. While I was in college and we had little to nothing, the bills still had to get paid. We had five credit cards of incrementally more debt on each. I set aside $250. per month to pay on them. On 4, I paid the minimum. On the fifth, the lowest, I paid the rest of the $250. Once that bill was gone, I rolled up that payment into the next and the next until the last bill was getting a $250. payment each month. It took a couple of years, but it got done. Good luck and God bless all of us struggling under the rising cost of everything.

  • TOR November 30, 2013, 8:27 pm

    Don’t think that’s a flaw of the method. It is just hard to get ahead in an environment where wages are stagnant and goods are inflationary.

    Inflation aside money is always 3 steps forward and 2 steps back. Keep on doing the right thing for long enough and it does get better.

  • Terri July 31, 2018, 2:15 pm

    I’m really late to this, but that’s why it’s important to always re-evaluate your budget and re-adjust. Your budget should be a living breathing thing.

    Also your income should be increasing. Based on this blog post it almost sounds as if your income is flat and your expenses are increasing. I hope that isn’t the case because if it is, then it stands to reason why you would look up and find yourself in a pickle.


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