The DOLP Snowball method to pay off Credit Cards
September 24th, 2007 by LuLuGal
Hi everyone, I just found this post on Yahoo about the DOLP method of paying off your credit cards. Now is is just me or does this method look familiar to you?
The DOLP method looks just like the original snowball method. It is in fact just another type of snowball method because at the heart of snowballing debt is the concept that you pay the minimum on everything except ONE account.
Then you pay as much as you can on the Golden Child or the Chosen One which is the account you are focusing on. The only thing about the DOLP method is that you now have to do some calculations in order to pick which account is going to be the Chosen One.
With the two original Debt Snowball methods all you had to do was either pick the card with the
(1) highest balance or
(2) highest interest rate.
Now this was simple and you could do it just by eyeballing your information. There was no calculation needed. You just picked an account and you threw money at it.
With the DOLP (in my opinion it should be called Snowball method #3) you have to divide your total balance by the minimum payment to get a number. Then you order the accounts in reverse order and pay the smallest DOLP first.
Whatever your credit score might be you might want to find a credit card that has a low interest rate. You can compare credit card offers and find out the credit card company’s policies for the information on there credit cards.
Just from eyeballing my credit cards I can see that my DOLP order would be the same order I am currently using. I chose to snowball my credit cards in order of smallest balance to largest balance.
It looks like my DOLP will be the same thing. So what was really the point of calculating the DOLP?
I am going to lunch in a while so I will have to leave the actual calculations for later. But I will do a DOLP……just for fun…and let you know what happened.
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September 24th, 2007 at 10:14 am
I came across the DOLP snowball a while back, and that was the first thing I asked, too. What’s the purpose of figuring out the DOLP?
What I came up with is that by paying the smallest DOLP score first, you would be trying to get the most efficiency out of your payments, especially early on when your snowball is the smallest. The higher minimum monthly payment relative to the balance will be added to your snowball, causing you to pay off the debt that will be paid off most efficiently as opposed to fastest. For most people, the order won’t be much different from Dave Ramsey’s smallest to largest method. The main way that it would be different is if you have a debt with a high payment that would have been paid off soon anyway. This gives you the outside chance of getting a higher debt paid off first and being able to add it into your snowball from the start.
There’s a lot to be said about the logic of using the DOLP calculation. Mathematically it makes a lot of sense.
However, it does not take into account what Dave Ramsey’s method would call The psychological boost of paying some of the debts off quickly. Because anyone who has listened to Dave Ramsey for any length of time would probably agree that most of the problems that most of the people have with money is not math, but behavior. The early payoff can give you the boost you need to encourage you to make the changes that need to be made. You could potentially save money in the long run using the DOLP, but it won’t be much. And if you start strong and then end up quitting for lack of psychological support it won’t benefit you at all.
And again, mathematically, the converse could be true, too. Taking the inverse of the DOLP could be better for some people if they end up putting their money on debts that would have taken a long time to pay off and the smaller ones that are close to payoff end up paying themselves off before you reach them with the snowball. I guess if you are doing the reverse of the DOLP you would have to call it the PLOD method.
Ok, that’s my two cents.
September 24th, 2007 at 11:58 am
I like the Dave Ramsey plan the most because of the benefits of seeing more consistent progress. I think it has the most chance of success for most people who are trying to fix their debt problem. As he says himself, “If it was all about math, they wouldn’t be in debt in the first place.”
In my case, Dave’s plan doesn’t work so well. The reason is that there are 3 debts but all of them are over 10k. Progress is going to be pretty slow no matter what method is used.
I came up with a modified plan that seems the same as the dolp method. I listed my debts largest payment to smallest payment. Starting with the largest minimum and working my way to the smallest will have the end result of getting me out of debt a little faster and the psychological benefit of the Dave Ramsey plan will kick in after the first one is paid off because the next one won’t be far behind thanks to the larger payment of the first one.
I’m now down to two payments and still making progress. Of course I’ve also come to hate credit now so I disagree with Mr. Bach when he reccommends leaving the accounts open after they are paid off.