How to Use the Snowball Method to Pay Off Your Debt Faster

Feeling overwhelmed by debt? It’s a common feeling, but don't despair! There are strategies you can use to tackle your debt and start building a brighter financial future. One of the most popular and effective methods is the Snowball Method.

What is the Snowball Method?

Developed by financial advisor Gail Vaz-Shirley, the Snowball Method focuses on motivation and momentum. Instead of prioritizing debts based on interest rates (as the more common Avalanche Method does), you start by paying off your smallest debt first, regardless of its interest rate.

Here’s how it works:

List Your Debts: Make a comprehensive list of all your debts, including credit cards, personal loans, student loans, and any other outstanding balances. Include the interest rate and the minimum payment for each debt.
Order by Size: Sort your debts from smallest balance to largest balance, ignoring the interest rates. For example, if you have a $500 credit card debt and a$ 5,000 student loan, you’d tackle the $500 debt first.
Pay the Minimum on Everything Else: Make the minimum payment on all your debts except the smallest one.
Attack the Smallest Debt: Throw every extra dollar you can spare towards paying off the smallest debt. This could be from a side hustle, a budget cut, or just a little bit more each month.
Roll the Snowball: Once the smallest debt is paid off, ‘roll the snowball’ by taking the money you were paying on that debt and adding it to the payment for the next smallest debt.
Repeat: Continue this process, systematically tackling each debt until they are all paid off.

Why the Snowball Method Works (and its Pros & Cons)

Psychological Boost: Seeing those small debts disappear quickly can be incredibly motivating. This immediate reward fuels your commitment and makes it easier to stick to your plan.
Builds Momentum: The early wins create a positive feedback loop, encouraging you to continue your debt repayment efforts.
Simplicity: It’s easy to understand and implement, making it a great option for beginners.

However, it’s important to acknowledge the cons:

Not the Most Cost-Effective: You might end up paying slightly more interest overall compared to the Avalanche Method, which prioritizes high-interest debts.
Requires Discipline: You still need to be disciplined and consistent with your payments.

Is the Snowball Method Right for You?

The Snowball Method is a fantastic choice if:

You’re feeling overwhelmed by your debt.
You need a motivational boost to stay on track.
You value the psychological impact of seeing quick wins.

Resources:

Investopedia - Snowball Method: https://www.investopedia.com/terms/s/snowball-method.asp
NerdWallet - Snowball vs. Avalanche Method: https://www.nerdwallet.com/article/debt-snowball-avalanche-method

Do you have experience with the Snowball Method?