How to Pay Off Debt Using The Snowball Method

How to Pay Off Debt Fast Using the Snowball Method

If you have researched the Internet you’re probably aware of all the different methods and recommendations to pay off debt.  The Avalanche Method, the Stack Method, The Snowball Method, and the 0% Balance Transfer option (Some will recommend this as a debt pay off method – don’t go there.  See my blog post Should I Use A 0% Balance Transfer Offer to Pay off My Current Debt?) are just some of the techniques. Depending on the author, it could even be a combination of methods and recommendations.

From an FTP Perspective.  The Snowball Method is the most successful way to pay off debt.  That’s because the Snowball Method takes into consideration many of the emotional and behavioral aspects of money that get us into debt in the first place.

The concept behind the Snowball Method is that you focus all your efforts on paying off the debt with the lowest balance first, making more than the minimum monthly payment.  Once that debt is paid off, move that payment to your next highest balance.  Now you’re paying more than the minimum payment on the second highest balance, which creates a “snowball” effect.  An example of this method and the steps are listed below.

  1. List all your debt, including your current minimum monthly payments. (List your debt, highest balance first and the smallest balance at the bottom)
  2. Focus on the smallest debt balance first (not the highest interest rate or the highest or lowest minimum payment) – smallest balance first! Your goal is to focus all your efforts on the smallest balance, paying more than the minimum, throw extra cash at this balance if you have it.  Make minimum payments on the remaining debt.
  3. Once you pay off the smallest balance, move that monthly payment to the next highest debt, to speed up the payoff of the second balance. Repeat, repeat, repeat, until all your debt is paid off.

Debt Worksheet Example

snowball debt worksheet

Look what happens below.  Once you pay off credit card 2, that monthly payment is then moved to credit card 1.  Instead of paying $75 per month you’re now paying $100.  Pay off credit card 1 and add that payment to the student loan.  By the time you pay off both credit cards and move those payments to the student loan you’re paying $100 more than the minimum payment on the student loan, that’s the snowball “effect”, each consecutive payoff of debt speeds up the payoff for the next balance.

Snowball Method

Because you’re focusing your efforts on the smallest balance first, and paying more than the minimum, you see the benefits of your efforts immediately.  This is the motivational aspect (emotional) you achieve by using the Snowball Method, and it’s the primary reason The Pig prefers this method. Focus and consistency (behavioral) are also critical to becoming debt free.  When you can immediately see results and stay motivated, then you are more likely to stay focused and consistent month to month.

(Manage and monitor your credit score by using a Free credit monitoring service like Credit Karma or Credit Sesame.)

If you’re feeling anxiety about going through the debt pay off process I highly recommend you try the Snowball Method to eliminate your debt.  You will be surprised how quickly you can pay off debt using this method, and feel confident and empowered doing it.  You will be debt free and Filling The Pig in no time.

Visit the tools section of the website to download a free copy of Workbook, which provides a blank template for using the Snowball Method.

Have you been successful paying off debt?  Add your comments below.

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Kevin is the owner of FTP and an author of the personal finance book series Filling The Pig. He uses his own past successes with debt, saving cash, investing and running his own home based businesses to teach others about Creating a Lifestyle of Opportunities.
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