Why the snowball strategy for paying debt is effective for Pinoys

Debt is a reality that many of us face. Whether it’s credit card bills, personal loans or household expenses, managing multiple debts can feel overwhelming. The stress that comes with trying to juggle various payments, all while supporting family and meeting daily needs, is something that most of us can relate to. Enter the debt snowball strategy—a simple yet powerful approach to tackling debt that has proven effective for many, including Filipinos.

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The debt snowball strategy is about focusing on paying off your smallest debt first, while making minimum payments on the others. Once the smallest debt is cleared, you move on to the next one, using the money you freed up from the first debt to make a bigger payment on the next. Like a snowball rolling downhill, your payments “snowball” and grow bigger as you go, eventually wiping out even your largest debts.

Here’s why this approach works so well for Filipinos:

1. Quick wins build confidence

Many of us carry multiple small debts, from credit card balances to store loans and cash advances. These small debts may seem like a drop in the ocean compared with larger debts, but they can still feel like a constant burden. One of the biggest advantages of the snowball strategy is that it gives you quick wins by paying off the smallest debts first.

In our culture, debt can be stressful and carry social stigma, with people often feeling ashamed or embarrassed to talk about it. By eliminating small debts early, the snowball method provides a sense of relief and accomplishment. These quick wins build momentum and confidence, making the larger debts feel less overwhelming as you go.

2. Focus and clarity

Managing multiple debts at once can be confusing. With so many monthly payments, interest rates and deadlines to keep track of, it’s easy to lose focus. The snowball method simplifies debt management by allowing you to concentrate on one debt at a time. This focused approach is incredibly helpful for many of us who often juggle financial responsibilities, such as supporting extended family, paying for education or helping with household bills.

Rather than spreading your finances thin and making small payments on all your debts, the snowball strategy provides clear direction. You know exactly which debt to prioritize, and each time you eliminate one, you can focus on the next.

3. Psychological benefits over financial calculations

Many financial experts recommend tackling the debt with the highest interest rate first, known as the “avalanche method.” While this may save money on interest in the long run, it’s not always the most effective strategy from a psychological perspective. For many, who often feel discouraged by their financial struggles, the emotional benefits of the snowball method can outweigh the purely mathematical savings of the avalanche approach.

The snowball method offers emotional satisfaction by providing small victories early on. These emotional wins can be highly motivating, particularly in a cultural context where financial stress can affect both individuals and families. The sense of progress encourages continued commitment to the debt repayment process, helping many stick to their plans longer.

4. Cultural adaptability and family responsibilities

One of the unique aspects of Filipino culture is the emphasis on bayanihan, or helping others in times of need. Whether it’s helping with a relative’s medical bills, paying for a sibling’s education or sending money back home as an overseas Filipino worker, there is often a strong sense of financial responsibility toward family. This can make debt repayment even more difficult, as Filipinos frequently balance their own financial goals with their family’s needs.

The snowball strategy can be adapted to this cultural reality. By clearing out smaller debts first, Filipinos free up more cash flow to either tackle larger debts or meet urgent family needs without derailing their overall debt repayment plan. The flexibility of the snowball method allows for adjustments when sudden family expenses arise, without sacrificing long-term financial progress.

5. Developing better financial habits

The process of focusing on one debt at a time under the snowball strategy helps build better financial habits. Many who adopt this method often become more mindful of their spending and saving behaviors. As the small debts disappear, the strategy encourages disciplined budgeting and tracking of expenses, which are crucial for long-term financial success.

This method also reinforces the importance of consistency. Instead of feeling paralyzed by the size of their total debt, Filipinos can focus on consistent, smaller victories, which naturally build the habit of financial responsibility.

6. Adaptability for small and large debts

Many Filipinos carry a mix of small and large debts, ranging from personal loans to business financing. The snowball strategy is highly adaptable to this variety. Whether it’s a P5,000 credit card balance or a P300,000 personal loan, the snowball method provides a clear pathway to pay off both small and large debts.

As small debts are cleared, more financial resources become available to tackle the larger loans, without overwhelming the debtor. The snowball effect grows over time, making it easier to attack significant debts down the line.

The right strategy for many of us

The snowball strategy is particularly effective for us because it combines psychological motivation with practical financial management. In a culture where debt can be stressful and family responsibilities often take precedence, the snowball method offers a manageable and adaptable way to eliminate debt over time. It not only builds financial momentum but also empowers individuals to take control of their money, one step at a time.

For many of us, the debt snowball strategy is more than just a way to pay off debt—it’s a tool that provides hope, structure and the confidence needed to break free from financial burdens. By focusing on small, achievable wins and building momentum, this strategy offers a practical solution to a common challenge many of us face today.

“The rich rule over the poor, and the borrower is slave to the lender.”—Proverbs 22:7

Randell Tiongson is a registered financial planner at RFP Philippines. To learn more about financial planning, attend the 109th RFP program this January 2025. Email [email protected] or visit rfp.ph.