How Can the Debt Snowball Method Help You Become Debt-Free?

When I was married, we had substantial mortgages, car loans, and credit card debt. Keeping up with the payments on our three condos, two sports cars, and multiple credit cards was challenging.

When we finally decided to take control of our spending, we learned about the snowball method for paying off debt. Using the guidelines to create a strategic plan helped us pay off our interest-bearing credit card debt. Becoming free of credit card debt lifted a huge burden off our shoulders.

What Is the Debt Snowball Method?

 The debt snowball method uses momentum to pay off your debts from smallest to largest. Every time you pay off a debt, you roll the payment into the next one to speed up your progress. These behavior changes provide consistency and motivation to stay focused as you eliminate debt.

How Does the Debt Snowball Method Work?

The debt snowball method is a strategy to pay off debts from the smallest balance to the largest. When you pay off one debt, you roll the payment you were making into the next-smallest balance. Eliminating each debt creates momentum to continue your progress.

These steps help you use the snowball method to pay off your debt:

1. List your debts from smallest to largest.

2. Make minimum payments on all your debts except the smallest.

3. Put as much additional money as possible toward your smallest debt until it’s paid off.

4. Take what you were paying on your smallest debt and add it to the payment on your next smallest debt until it’s gone.

5. Repeat the process until each debt is eliminated and you are debt-free.

Example of how the debt snowball method works

Assume you have four debts:

$1,000 medical bill with a $100 payment

$5,000 credit card debt with a $126 payment

$14,000 car loan with a $270 payment

$20,000 student loan with a $192 payment

You make minimum payments on everything except the $1,000 medical bill, which you’re paying off first.

Assume you start a side hustle and bring in an additional $500 monthly to add to your snowball. Add $500 to the $100 minimum for a $600 payment. Your medical bill is paid off within 2 months.

Next, take the $600 you freed up by paying off your medical bill and put it toward your credit card payment. Add the $600 to the $126 minimum for a $726 total payment. Your credit card debt should be paid off in approximately 7 months.

After that, take the $726 you were paying on your credit card debt and add it to the $270 minimum on your car loan for a $996 total payment. Your credit card debt should be paid off in approximately 12 months.

Finally, take the $996 you were paying on your car loan and add it to the $192 minimum on your student loan for a $1,188 total payment. Your student loan should be paid off in approximately 15 months.

Why Does the Debt Snowball Method Work?

The debt snowball method changes your thoughts and behaviors toward money. Because personal finance is 80% behavior and 20% knowledge, your mindset and actions are essential for becoming debt-free.

The quick wins with the debt snowball method show you can pay off your debt. Believing in yourself encourages you to continue making progress toward becoming debt-free.

How Can You Speed Up the Debt Snowball Method?

These tips help you get faster results from the debt snowball method:

• Cut your expenses: Consider reducing your subscription streaming services and eating at home more.

• Reduce your spending. Evaluate how much you need something before buying it. Pay cash rather than using your credit card.

• Earn additional income: Ask for a raise, take on a temporary or part-time job, sell the items you no longer want, or start a side hustle.

I look forward to hearing your stories about becoming debt-free!

Note: This post is for educational purposes only.