Article citing our research in the Journal of Consumer Research (via HBR) and mentions co-author Remi Trudel.
If you’ve ever set a lofty New Year’s resolution and failed to keep it — as 88% of people do, according to a 2007 survey by British psychologist Richard Wiseman — then you know how hard it can be to try to make a dramatic change overnight. After all, you can’t run a marathon if you’ve never run a single lap around your neighborhood. Starting small can help make your habits stick.
It can also keep you motivated. Research finds that the the “snowball method” of debt repayment, in which you list your debts in order from smallest to largest, and pay off the smallest one in full first before moving on to the second smallest, is more effective than the “avalanche method,” which prioritizes paying off the debt with the highest interest rate first.
While mathematically the avalanche method saves more money over time if done correctly, people are more motivated to pay off all of their debt by the snowball method. They see results more quickly, and that’s encouraging.
″‘Pay the smallest debt first’ is a straightforward strategy that can be easily communicated and easily applied,” writes Remi Trudel, a researcher for the Harvard Business Review. Prioritizing one small goal at time makes things less overwhelming.
The same can be applied to building up emergency fund savings. While thinking of the total amount you want saved — three to six months’ worth of expenses — can seem overwhelming, focusing on a smaller sum can is easier to hit and can inspire you to keep on saving. It’s why AmericaSaves.org advises people with no savings to aim for $500. It’s a stretch for some but still manageable. And once you do, you’ll want to keep up your savings momentum.
Starting small with savings or debt repayment is like beginning weight lifting with five-pound-weight repetitions. You’re building muscle memory before you move on to something harder.