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How to Use the Debt Snowball Method

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  • Post last modified:June 28, 2024

The debt snowball method is a popular debt reduction strategy that has helped countless individuals take control of their finances. Introduced by personal finance expert Dave Ramsey, this approach focuses on paying off debts from smallest to largest, regardless of interest rates. As you’ll discover, the debt snowball method is more than just a financial strategy—it’s a psychological tool that can motivate you to become debt-free.

Skale Money Key Takeaways

  • The debt snowball method prioritizes paying off smaller debts first
  • It provides psychological benefits through quick wins and momentum
  • Best suited for those who need motivation to stick to a debt repayment plan
  • May not be the most cost-effective method due to interest considerations
  • Can be more effective than other methods for many people due to its motivational aspect

Understanding the Debt Snowball Method

Photo by Pauline Bernfeld on Unsplash

How It Works

The debt snowball method follows a simple yet effective process:

  1. List all your debts from smallest to largest
  2. Make minimum payments on all debts except the smallest
  3. Put any extra money towards the smallest debt
  4. Once the smallest debt is paid off, roll that payment into the next smallest debt
  5. Repeat until all debts are paid off

Example in Action

DebtBalanceMinimum PaymentExtra Payment
Credit Card A$500$25$100
Personal Loan$2,000$50$0
Credit Card B$5,500$110$0
Car Loan$10,000$200$0

In this example, you’d focus on paying off Credit Card debt A first, applying an extra $100 on top of the minimum payment. Once it’s paid off, you’d roll that $125 into paying off the Personal Loan, and so on.

The Psychology Behind It

The debt snowball method capitalizes on the power of small wins. By focusing on the smallest debt first, you experience success quickly, which boosts motivation and confidence to tackle larger debts.

Benefits of the Debt Snowball Method

  1. Psychological boost from quick wins
  2. Clear and simple to follow
  3. Builds momentum and motivation
  4. Helps create positive financial habits

Potential Drawbacks

While effective for many, the debt snowball method isn’t without its critics:

  1. May result in paying more interest over time
  2. Not mathematically optimal compared to methods that prioritize high-interest debt
  3. May take longer to become debt-free compared to other methods

How to Implement the Debt Snowball Method

1. List and Organize Your Debts

Create a comprehensive list of all your debts, ordered from smallest to largest balance.

2. Create a Budget

Analyze your income and expenses to determine how much extra you can put towards debt repayment.

3. Find Extra Money for Debt Payments

Look for areas to cut expenses or ways to increase your income to accelerate your debt payoff.

4. Start the Snowball

Begin making minimum payments on all debts except the smallest. Put any extra money towards the smallest debt.

5. Stay Motivated and Track Progress

Celebrate each debt you pay off and visualize your progress to stay motivated.

Tips for Success

  • Stick to your budget religiously
  • Avoid taking on new debt
  • Use windfalls (tax refunds, bonuses) to boost your debt payments
  • Consider a side hustle to increase your debt repayment capacity
  • Regularly review and adjust your plan as needed

Real-Life Success Stories

Many individuals have successfully used the debt snowball method to become debt-free. For example, Sarah, a teacher from Ohio, paid off $45,000 student debt over three years using this method. She credits the psychological boost from paying off her smallest debts first as key to her success.

Debt Snowball Method and Credit Score

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While initially your credit score might dip slightly as you close accounts, the long-term effect of becoming debt-free is typically positive for your credit score.

Tools and Resources

  • Debt snowball calculators:, EveryDollar
  • Budgeting apps: YNAB, Mint
  • Financial education: Dave Ramsey’s website, personal finance books

Alternatives to the Debt Snowball Method

Debt AvalancheSaves more on interestMay take longer to see progress
Debt ConsolidationSimplifies paymentsMay extend repayment term
Balance TransferCan provide 0% interest periodUsually requires good credit


The debt snowball method offers a psychologically rewarding approach to becoming debt-free. By focusing on quick wins and building momentum, it can help you stay motivated on your journey to financial freedom. While it may not be the most mathematically optimal method, its effectiveness lies in its ability to keep you engaged and committed to your debt repayment plan.

Remember, the best debt repayment method is the one you can stick to consistently. If you’re motivated by seeing debts disappear quickly, the debt snowball method could be your ticket to a debt-free future.

FAQ Section

Q: Is the debt snowball method right for everyone?

While effective for many, it’s not universally the best choice. Those who are motivated by optimizing interest savings might prefer the debt avalanche method.

Q: How long does it typically take to become debt-free using this method?

The timeline varies based on your total debt, income, and how much extra you can put towards debt repayment. Many people report becoming debt-free in 2-5 years.

Q: Can I modify the debt snowball method?

Absolutely! Some people choose to prioritize high-interest debts within each balance category for a hybrid approach.

Q: What if I can’t afford more than the minimum payments?

Focus on creating a strict budget and finding ways to increase your income. Even small extra payments can make a difference over time.

Q: Should I stop contributing to savings while using the debt snowball method?

It’s generally recommended to have a small emergency fund before focusing intensively on debt repayment to avoid new debt from unexpected expenses.