Falling credit cards

Harvard Confirms Savvy Life Strategy

By Kevin Gibbons

For the past six years, we’ve used the “snowball” approach in helping clients create a plan to pay down their credit card debt.

In this method:

  1. You pay the minimum required on all your debts, except for the one with the lowest balance. For that one, you pay as much as you can on top of the minimum.
  2. When that card is paid off, you take the money you were using and apply it to the next lowest balance card – on top of the minimum you have been paying.
  3. You keep doing this, applying more and more money to the remaining debts as you pay off the lower balances.

While this approach does not save as much money as paying off the highest interest debt first, we have found clients are more likely to stick with it and complete their debt repayment plan.

Now, The Harvard Business Review has published a study confirming this approach. “Focusing on paying down the account with the smallest balance tends to have the most powerful effect on people’s sense of progress — and therefore their motivation to continue paying down their debts,” Harvard Researcher Remi Trudel writes on HBR.

Personal finance is personal. A good coach needs to understand each individual client, their situation, their needs, and what best motivates them. At The Savvy Life, our high success rate with clients is because we approach each one individually and craft unique spending plans (and snowball debt repayment plans) tailored specifically for them.