Debt Snowball Method

Debt Snowball Method: Guide to Paying Off Debt Faster

The debt snowball method is a debt payoff strategy that focuses on paying off your smallest debt first before moving to the next largest debt. This method can help you pay off debt faster by keeping you motivated with small wins. Let’s take a closer look at how it works.

How the Debt Snowball Method Works

With the debt snowball method, you’ll create a list of all your debts from smallest balance to largest. Focus all your extra money towards paying off the smallest debt first while making minimum payments on the rest. When the first debt is paid off, roll the amount you were paying towards the next smallest debt. This “snowball effect” allows your payments to get larger as debts are paid off.

The 6 Steps of the Debt Snowball Method

Here is a step-by-step overview of implementing the debt snowball:

1. List Your Debts from Smallest to Largest Balance

Make a list of all your debts starting with the smallest balance. Do not worry about interest rates with this method.

2. Make Minimum Payments on All Debts Except the Smallest

Pay the minimum payment on all of your debts except the smallest balance. You want to put as much money as possible towards the smallest debt.

3. Pay as Much as Possible Towards the Smallest Debt

With all extra income, make payments towards the smallest debt to knock it out quickly. This small win will give you momentum.

4. Repeat Process as Each Debt is Paid Off

Once the smallest debt is paid off, roll the amount you were paying into the next smallest debt. Repeat this pattern as each balance is paid off.

5. Build Your Debt Snowball

As debts are paid off, your “snowball” will grow bigger with extra funds going towards knocking out debts. This snowball effect helps you pay off debts faster.

6. Continue Until All Debts are Paid Off

Keep following this strategy until all unpaid debt balances are zero besides your mortgage. Maintaining focus is key to success.

Tips to Maximize the Debt Snowball Method

Here are some tips to get the most out of the debt snowball:


  • Pay more than the minimum – Put as much extra income as you can towards the small debt to pay it off rapidly. This builds momentum.
  • Sell items – Consider selling unused possessions for extra income to put towards debt.
  • Pick up a side gig – A side hustle like ridesharing or freelance work can provide funds to speed up payoff.
  • Reduce expenses – Find ways to cut back discretionary spending to put those funds towards debt instead.
  • Increase income – Ask for a raise or find a higher paying job. More income makes the snowball more powerful.
  • Automate payments – Set up automated payments to avoid missing debt payments each month.
  • Consider debt settlement – Debt settlement involves negotiating payoffs less than the total owed. This may help eliminate high-balance debts faster. Assess if combining targeted settlement with the snowball aligns with your situation.

The Debt Snowball Method vs. Avalanche Method

The debt snowball method differs significantly from the debt avalanche method, which is another popular debt payoff strategy.

With the avalanche method, you focus on paying off the debt with the highest interest rate first, regardless of the balance size. This allows you to save the most money on interest charges over time. The avalanche method takes a more mathematical approach – you pay off debts in order of interest rate, from highest to lowest.

In contrast, the debt snowball method ignores interest rates and instead pays off the smallest balance first. This gives you quick wins to stay motivated, building momentum as you move to the next largest debt.


So which method is better? Each has pros and cons:




Debt Snowball Method

– Provides motivation through early small wins
– Builds momentum to tackle larger debts
– Simple to implement by focusing on balance size

– May cost more in interest expenses

– Not mathematically optimal

– Risk of slipping up before larger debts paid off

Debt Avalanche Method

– Saves the most money overall

– Mathematically optimal

– Gives sense of financial control

– Takes longer to see initial results

– Less motivation without quick wins

– Requires focus on math over psychology

So which method should you choose? It depends on your personal needs and psychology. If you want pure mathematical optimization, the avalanche method may be slightly better. But if you struggle with motivation and discipline, the debt snowball gives you small wins to stay on track. Assess your personality and do what fits best to ensure you stick to your debt payoff plan.

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