Study Finds Eliminating Smaller Debts Most Effective in Reducing Overall Debt

presented by: Gary Massey
A new study published in the Journal of Marketing Research found that clearing smaller debts increases a person’s chances of paying off any remaining debts, labeled the “snowball method.” As reported by the Human Resources Journal, the authors of the study examined 4,200 accounts with Freedom Financial Network, a debt settlement company, and compared debtors who used the “snowball method” to others who first paid off debt with higher interest rates. The study concluded that consumers who utilized the “snowball method” were more likely to eliminate their overall debt as it “builds confidence and motivation.”
One of the study’s co-authors adds there is indeed a boost from paying off and closing debt accounts that is a result of the number of accounts being closed, not the number of dollars that is being paid off. The “snowball method” is based on the notion that smaller victories are easier to achieve, which gives the debtor a feeling of accomplishment. The study reveals that getting out of debt may be as much a psychological battle as it is a financial one; therefore, the elimination of debt, specifically several smaller debt accounts, will create the perception of progress and may motivate someone to eventually be free of debt.
Essentially, the study suggests that tackling smaller debts will put a person in the “right frame of mind and on course to manage the heavier debt burdens.” The study came in the wake of reports that the average credit card debt per U.S. consumer increased over the last year by more than $270, according to credit reporting agency TransUnion. Each card user, on average, had $4,971 of credit card debt in the second quarter of this year.
At Massey & Associates, P.C., our Chattanooga bankruptcy lawyers understand that managing one’s debt can become overwhelming and frustrating, and knowing where to begin can be one of the most difficult parts of the process. Our experienced legal team has years of experience helping Tennesseans control and even eliminate their debt, and would be happy to discuss your available options with you during a complimentary case consultation. Call (423) 697-4529 to see how we can make your financial future a bright one.