The debt snowball - how and why this method works

Think about your debt – I mean really think about it.

Are you overwhelmed yet?

For many of us, thinking about debt causes anxiety. It leaves us feeling: I have to get rid of my debt – but where do I start? The good news is that there are several ways to pay off debt. You just have to find the right method for you.

I’m a big fan of the debt snowball, and it’s the exact plan I used to pay off $76,453 in 19 months. While it wasn’t easy, it was definitely worth it.

Today, I’m going to walk you through how the debt snowball works so you can decide if it’s right for you!

So what is the debt snowball?

Picture a snowball rolling down a hill. It starts small but as it builds up speed, it adds layers of snow. As the snowball gain momentum, it gets larger and larger. By the time the snowball reaches the bottom of the hill, it’s grown to the size of a boulder.

The debt snowball uses this theory – start small and work your way up. Over time, you’ll gain momentum.

How does the debt snowball work?

The debt snowball is one of the most effective ways to get rid of debt – and for good reason. It’s simple and straightforward. Here’s what you do:

You’ll calculate your debts from smallest to largest regardless of interest rate. (Everything except your mortgage)

You’ll make minimum payments on every debt except the smallest. You put as much extra money towards the smallest debt as you possibly can. For some, this might mean picking up a second job or requesting overtime at work.

Do whatever it takes to get the first debt knocked out! It might even mean that you’ll be able to get rid of two or three small debts in the first month. Talk about building momentum!

So once you’ve paid off the smallest debt, you’ll add the payments you were making on it to the second smallest debt. This is when you start to get the snowball rolling.

You continually repeat the process until you’ve worked your way up to the largest debt. Stay focused, and you’ll become debt free.

That’s why I love the debt snowball method. The rules are straightforward. No complicated calculations or implementation. You just need to know what you owe and you need the motivation to get started.

Once you start seeing progress on your debt, you’ll be more likely to keep going. Think about all the things you can do once you become debt-free.

Why the debt snowball method is effective

It’s all about behavior modification. Being in debt is hard. We know this. But when you’re able to see progress quickly, you’re more inclined to stick with the program until the end.

The first time you clear a small debt, you’ll experience a high of sorts. That progress feels so good! Makes sense, right? That little pesky debt is gone and you realize you can actually do this.

With that extra momentum on your side, your thoughts about money changes. As a result, your behavior changes.

The debt snowball in action Let’s look at an example of the debt snowball:

Here’s a list of debt from smallest to largest:

$500 credit card $2,000 medical bill $10,00 car loan $12,000 student loan Total: $24,500 Using the debt snowball method, we would make the minimum payments on our medical bill, car loan, and student loan.

We would throw as much money as we can towards the credit card. Let’s say by cutting the Starbucks addiction and eating out, we’re able to throw an extra $100 each month towards that debt.

Let’s also say we sell some things on eBay which gives us an extra $100 towards it. That’s $200 extra that we’re able to pay to that credit card.

Way to go, us! In just three months, we’re able to say goodbye to the credit card bill. Once it’s gone, we take that extra money we were putting towards the credit card and throw it at the medical bill.

By now you know the drill. In less than two years, we’re able to become debt free. But we’re not here to play pretend.

This fake scenario can become your reality if you dedicate yourself to the process. Commit yourself to becoming debt free.

Think about all the things you can use that money for instead, like savings, retirement, and charity.

Are you ready?

At EndThrive, our mission is to create content that informs, educates, and inspires. Our advice is objective and based on comprehensive research and experience.