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Published on September 7, 2021

How to pay off debt with the snowball method

The snowball method is one of the best ways to pay off debt, regardless of what the mathematicians say. One of the reasons is because it focuses on the human element of motivation and excitement versus just math. Because living life based on just numbers is boring and uninspiring for most, including myself. As someone who paid off $99K of debt, I personally know how good it feels to not owe anyone money. For me, paying off debt and having fewer companies that you owe money to is a double win. It’s like improving your personal finances and your mental health at the same time. This is why so many people, including myself, prefer the snowball method as their go-to the debt-repayment strategy.

Before Paying Off Debt, Take Care of Yourself First

There are a few things that I want to point out before we jump into the snowball method. Prioritizing your debt freedom is important, but not as important as taking care of yourself. You want to make sure you have a monthly budget, a starter emergency fund, and are pre-saving for upcoming costs. Having these financial fundamentals in place is a key element of paying off debt and staying out of debt. 

What’s the Snowball Method?

The snowball method is a debt-repayment strategy that focuses on paying off your smallest debt first. While making minimum payments on the rest of your other debts. You start by listing out your debt balances from smallest to largest. All while disregarding the type of debt or interest rate that you have. The goal is to help you pay off your debt as quickly as possible, by starting with the easiest to pay off. This is why the snowball method targets the smallest debt that you owe. Once you paid off your smallest debt, you then roll that extra payment towards your next smallest debt. This strategy creates a snowball effect since you’ll have more money to push towards your next smallest debt. Which will help you build up the momentum to pay off your debts even faster.

This is the same strategy used when building a snowball. You start with a small hand-sized clump of snow and continue clumping more snow on top of it until it turns into a massive snowball. In the beginning, this strategy might not be much to see. But in the end, you’ll create something that seems impossible to do. This is the same strategy as this debt-reduction strategy. Paying off your smallest debt might not look like a big accomplishment. But once you get that momentum going, you’ll have more cash available to pay off a massive amount of debt. I know this because I still get asked how my family paid off $99K of debt and I tell them, it’s possible.

How does the Snowball Method Work?

Here is a breakdown of how to use the snowball method: 

  1. List out your debts from smallest to largest.
  2. Make minimum payments on all of your debts, except your smallest debt.
  3. Put as much as possible towards your smallest debt.
  4. Once the smallest debt is paid off, Roll that payment towards your next smallest debt
  5. repeat until debt-free.

Example of Using the Snowball Method

The first step of the snowball method is to list out your debts from smallest to largest regardless of interest rate.

  • Credit Card #1: $500
  • Credit Card #2: $1,500
  • Student Loan #1: $10,000
  • Student Loan #2: $14,000
  • Car Loan: $25,000

The second step is to make the minimum payments on the rest of your debts, except your smallest.

  • Credit Card #1:_______
  • Credit Card #2: $50
  • Student Loan #1: $150
  • Student Loan #2: $175
  • Car Loan: $425 

Thirdly, you put as much as possible towards your smallest debt.

Let’s say you get a side hustle that makes $200 a month that will go towards your debt. This strategy is called the debt snowflake method. It’s a smart way to purposely push extra money towards your debt to help you get out of debt sooner.

In your budget, you’ve also squeezed out an additional $300 to pay off your smallest debt.

Credit Card #1: will get $300 from your regular income and an additional $200 from your side hustle. This will allow you to pay off your first debt as quickly as possible.

The fourth step is to repeat these steps once the smallest debt has been paid off. You’ll push your original $300 of your income and $200 from your side hustle towards helping you pay off your second credit card.

It’s Ok to Make Snowball Modification

A small modification that my family learned when paying off debt is to make minimum payments on all of your debts. Then wait until the end of the month to push any extra debt payments towards your smallest debt. This strategy allowed us to keep our budget flexible and make more realistic debt payments during our debt-free journey.

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