How To Harness The Neurological Power Behind The Debt Snowball

How To Harness The Neurological Power Behind The Debt Snowball

{Editor’s Note: This article was written by Mr. SR from Semi Retire Plan. He writes about personal finance, behavioral economics, and early retirement. This article was originally published on The Money Mix and is published here with permission.}

Have you heard personal finance bloggers mention a guy named Dave Ramsey? If so, your mental image is probably of a bald guy cutting up credit cards and shouting about a snowball system, baby steps, and the Financial Peace University program.

While we would all agree that it’s preferable to not be in debt, the specifics are controversial, including the debt snowball payoff method.

Why Pay Off Debt Early?

Aggressively getting out of debt early has several advantages.

You will:

  • Reduce your total amount of interest paid over the life of the loan by effectively shortening the loan term
  • Have extra cash leftover each paycheck after you finish paying off each loan
  • Increase your net worth with certainty – without the volatility that accompanies more traditional investments

First, I recommend evaluating what caused your debt. If you have high-interest consumer debt, what steps will you take to avoid incurring additional indebtedness in the future?

For example, if you don’t already have an emergency fund, I encourage you to build one. Paying an unexpected expense out of pocket isn’t fun, but it’s better than adding 25% in annual interest from using a credit card.

Is your debt from medical expenses? Make sure you have the best health insurance for your family’s situation in the future. Are you making the most of the options available from the Affordable Care Act? You may also be able to gain tax advantages and avoid medical debt in retirement by using a Health Savings Account.

Or in some cases, your income may just be too low to get traction on the road to financial independence. If so, you may want to consider a job change, even it’s early in your career.

Another thing to avoid during times of higher debt loads is lifestyle creep. That happens when you get a little extra income and spend it on things you’ve wanted but probably don’t need. The cost of these items are often not one time things. They stay in the budget for some time to come.

How The Debt Snowball Works

Using this method, you arrange your debts from smallest to largest but exclude your primary residence’s mortgage if you have one. Then, pay the minimum payment on each debt plus extra (the most you can afford) on the one with the smallest balance. Once the smallest debt is paid off, you pay extra on the next lowest.

Repeat until you’re debt-free, then stay out of debt!

In this plan, the type of debt isn’t relevant. For example, the snowball system doesn’t consider if the debt is a car payment, a mortgage on a second home, or an unsecured debt (which typically have higher interest rates).

The advantage of using this strategy is that you’ll reduce your monthly payments (each time you pay off a debt) and save money on future interest by not paying for the full term of your loans. Then, you can use your extra money each month to invest or even pay off your mortgage!

Problems With The Debt Snowball

The controversial element to this is that the debt snowball doesn’t consider the interest rates of your debts when prioritizing. Mathematically, you would benefit most by paying off your highest interest debts first. There’s a name for this approach – the “debt avalanche.”

Furthermore, should you necessarily try to pay off your debts early if they have a low-interest rate? In theory, you might be better off investing your money than paying extra towards the debt with a low rate. Why would you accept a 4% “return” from paying off your student loan early (and avoiding future interest), when you could make 7-10% invested in index funds?

More traditional debt management techniques include transferring your balance to a home equity loan or debt consolidation loan to shift to lower interest rates quickly.

Ultimately, which approach is right for you is mainly dependent on your own goals and risk tolerance. Notably, though, people using the debt snowball method have a reputation for being ultra-focused and passionate about their progress.


What makes paying off small debts more exciting than paying off debts that are costing you more in interest? The short answer is because of chemicals in the brain and gut. And although debt repayment brought us to this topic, there are practical applications for you below, no matter what financial stage you’re in.

Chemicals That Enhance The Debt Snowball


Neurotransmitters are chemicals that transmit between neurons or nerve cells. Dopamine, the “feel good” neurotransmitter, helps us focus and makes us feel happy when we meet our goals.

The debt snowball method is structured to help you achieve wins as quickly as possible since you’re paying extra on your smallest debts first. By completing the initial goals rapidly, you’re getting dopamine spikes more often. This makes you feel good, which makes you want to repeat the behavior. It also keeps you focused on your plan.

Visually tracking your debt journey, for example, can help you realize your progress and feel gratification. You can essentially “gamify” your finances to increase your happiness.

Dr. Nora D. Volkow, the Director of the National Institute on Drug Abuse at the National Institutes of Health, shared a powerful visual about the power of dopamine:

“Mice can die of starvation because they don’t have the motivation to engage in the behaviors to go and eat the food. You can rescue this animal by injecting dopamine into the areas of the brain that control this. But if you don’t do that, these animals will die of starvation. And that really epitomizes how extraordinary important dopamine is. It gives you that energy, the drive to do things.”

Dopamine gives you the drive to do things!


When you are exercising, stressed, or excited, endorphins are then released by the pituitary glands and the hypothalamus. They produce a feeling of relief and being pain-free.

In addition to killing pain, endorphins can act as antidepressants, sleep enhancers, and even as self-esteem boosters.

Debt is stressful and leads many doctors to depression or suicide. But by facing it head-on and pushing yourself to spend less and pay more against your debts, you’ll experience emotional pain relief from endorphins. A little extra sleep and self-esteem can always help too, right?


Oxytocin spikes during emotional moments, and it makes you feel high. It’s primarily associated with moments of feeling unity and trust, and it strengthens personal connections.

When people are paying off debt with intensity, it feels like they’re a part of a movement that is greater than themselves. They’re a part of a community, all pursuing freedom.

Dave Ramsey, who popularized the debt snowball, invites listeners to do a “debt-free scream” on the radio show each day — these are clear high moments after stressful fights for financial freedom.

Even if you choose a different debt repayment approach or if you’re already debt-free, there are several takeaways you can use in your own life.

How To Use This Knowledge


Russian physiologist Ivan Pavlov, whose studies are now synonymous with his name, researched appetite and involuntary responses. His famous work with dogs actually shows how our behavior changes when we start to achieve our goals.

In Pavlov’s study, he rang a bell or played the metronome while dogs were eating. After repeating these conditions, the dogs eventually would salivate at the sound of the bell even if the food wasn’t present. This is called classical conditioning.

When you achieve your goals, neurotransmitters help you feel good. If you do this frequently, you will condition yourself to feel good about goals. This will make you even more motivated for your next pursuit.

Unlike the dogs, though, you can choose to ring your own “bell” in life.

Here are the 3 ways you can proactively set yourself up for success.

3 Practical Takeaways For Success

1) Set small, quickly achievable goals that ladder up to your big plans

The debt snowball benefits from having pre-set small goals in place. Each debt you pay off is a goal you are achieving. But, if debt freedom isn’t your current focus, then identify what’s most important to you in life. Next, break your long-term financial goals into concrete, smaller steps.

You may already be familiar with SMART goals. This acronym is popular in corporate settings and stands for Specific, Measurable, Achievable, Realistic, and Time-bound. Well, I would add on “And Fast” – you need to set goals that you can reach in a brief period to maximize the gratification benefit.

For example, rather than phrasing your goal as “I want to retire early in 10 years,” make a smaller goal of “invest $1,000 this month” or “make $100 this week from my side hustle.” Honestly, even these goals can be broken down into more detail.

Maybe your focus for Day 1 can be “don’t order a pizza tonight” – cook at home instead.

Permit yourself to lower the stakes for success and failure for your goals. If you want to be a professor as your long-term career goal, that may require a master’s degree. It’s not possible to complete the master’s degree by midnight tonight, but you can look for a new job that offers tuition reimbursement for your master’s program.

If you shift your definition of success to be an outcome you can actually complete today, you will be successful more frequently.

When you intentionally focus on smaller goals, you won’t be ignoring your long-term dream. But, you will feel happier and more focused at each step along the way.

2) Do something stressful — it can be valuable and fulfilling

We often hear that chronic stress can be unhealthy. But, the right amount of “good stress” can help you feel motivated, resilient, and focused. You can even turn bad stress into good stress by thinking positively about the possible benefits of the situation.

If you’re not deeply cutting your spending to pay off debt, consider pushing yourself a bit towards your other goals — especially if you’re early on in your wealth-building journey. Is there something you can give up in the short-term, even if it’s mildly stressful?

If you’re trying to start a freelance writing business as a side hustle, don’t be afraid to sign up for a training course, even if it might be challenging or expensive in the short-term.

If you’re considering retiring and your finances are in order, go for it! Perhaps it’s intimidating at first, but the transition away from your career can yield greater fruits in a fulfilling new chapter of your life.

You’ll be rewarded in the long-term, and also get relief from endorphins along the way as you push through each step towards your goals.

3) Seek moments of unity and trust

Do you have family members or friends who are pursuing common financial goals with you? Working with others towards a common purpose isn’t just a pleasant idea. You’ll experience a real rush of oxytocin and gratification when you reach milestones along the way.

Even a pat on the back or a supportive hug can send out oxytocin that helps to dissolve the short-term stress and pain.

The good feelings can result in a real increase in productivity too. A 2014 Stanford study found that when people were treated as though they were working together, they persisted 48 to 64 percent longer on challenging tasks.

Remember how these chemicals can act as antidepressants? Social support is also important for those fighting depression so that you’ll benefit on that front as well.

Consider sharing your goals or struggles with your spouse or partner, or participating in online communities that have similar interests. This will hold you accountable, but it will also make the moments of celebration even more gratifying.


The empowering conclusion here is that you’re not stuck with a fixed amount of these seemingly magic chemicals. Certainly, people can naturally have varying levels, but you can also set yourself up to experience motivation and gratification.

Whatever your financial and personal ambitions are, I encourage you to set small goals often. Then pursue them, achieve them, and feel good!