What is the Debt Snowball Method?
The debt snowball method is a debt reduction strategy where you pay off debts in order from smallest balance to largest, regardless of interest rate. As each debt is paid off, the payment that was being made toward it is rolled into the payment for the next smallest debt, creating a "snowball" effect.
How the Debt Snowball Works
- List all debts from smallest balance to largest
- Make minimum payments on all debts except the smallest
- Put extra money toward the smallest debt
- When paid off, roll that payment to the next smallest debt
- Repeat until all debts are paid off
Benefits of the Debt Snowball
- Quick Wins: Paying off small debts first provides psychological motivation
- Momentum: Each paid-off debt builds momentum and confidence
- Simplicity: Easy to understand and implement
- Behavioral Focus: Addresses the emotional side of debt repayment
Debt Snowball vs. Debt Avalanche
The debt avalanche method prioritizes debts by interest rate (highest first), which mathematically saves more money. However, the debt snowball method often works better in practice because:
- Quick wins keep you motivated
- Fewer accounts to manage as you progress
- Behavioral changes matter more than math for most people
Tips for Success
- Stop using credit cards while paying off debt
- Build a small emergency fund first ($1,000)
- Find ways to increase your income or cut expenses
- Celebrate each paid-off debt as a milestone
- Track your progress visually with charts or apps
