The Debt Snowball: Your Guide to Destroying Debt Fast

Debt snowball - picture of man celebrating at top of snowy mountain

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Hey everybody! I’m super excited today because we’re focusing on one of my all-time favorite topics, paying off debt.

But we aren’t just talking about it. I’m actually going to show you how to pay off your debt at warp speed. It isn’t complicated, and it doesn’t take a genius to do it. What it does take is a commitment to becoming debt-free and a plan to get it done.

Today, we’re going to talk about one of my favorite methods to pay off debt – the Debt Snowball. This plan has worked for thousands of people, and it could work for you too. Let’s get started!

What is the Debt Snowball?

The debt snowball is a one of my favorite debt repayment methods. It’s simple to use, easy to understand, and can help you destroy your debt in a flash. It organizes your debts and helps you make progress quickly. I absolutely love it.

Using the debt snowball:

  1. Gets you organized to pay off debt by creating a concrete plan.
  2. Helps you stay focused on completing one task at a time.
  3. Provides quick wins to keep you motivated.
  4. Increases the rate at which you pay down your debt.

One of my favorite things about the debt snowball is that it organizes your debt so you’re focused on paying off one thing at a time. Whenever you have a gazillion things to do, it’s easy to feel overwhelmed. When you have a gazillion debts to pay off, it gets even worse. Those feelings lead to panic, and we often become paralyzed by the huge task in front of us.

But, when we concentrate on completing one thing at a time, paying off each debt one by one, it doesn’t seem so overwhelming. Plus, with each task completed, we earn an emotional victory – which builds momentum. And once we’re rolling, we don’t want to stop. That’s why this method is so effective and why it might just work for you!

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Preparing for a Debt Snowball

Paying off debt isn’t rocket science, but it’s a lot easier when you use a proven system to get it done. In our book Zero Down Your Debt, we explain the exact steps you can take to get out of debt – including the use of the debt snowball. But, since we don’t have time for everything, here’s a quick highlight of some of things you should consider before attempting a debt snowball of your own:

  • Create a Zero-Sum Budget – Before attempting the debt snowball, it’s super important to know how much money you have coming in and going out. Create a zero-sum budget so you have total control over every penny available to you. You’ll build your snowball payments into your budget, just like every other expense you have each month.
  • Build a Starter Emergency Fund of $1,000 – The last thing you want is a surprise expense to pop up, throw you off track, and end up further in debt because of it. That’s why it is super important to build a starter emergency fund of $1,000. It will help you get through the tough times and keep you on track. Store that money separately from your other funds and use it only to pay off unexpected emergency expenses. Start your emergency fund in a free online checking account here.
  • Commit to Paying Off Debt Quickly – The faster you pay off debt, the better this method works. Part of the debt snowball’s power lays in the momentum it creates. Don’t half-ass it. Fully commit to the process, and plan to have your debt paid off in terms of months rather than years.
  • Cut Unnecessary Expenses – It’s time to get rid of the expenses you don’t need, and use that money to pay down your debt faster! Eliminate items like cable TV, restaurant spending, going out on weekends, huge cell phone plans – anything that you don’t need to live. Take the extra cash and pay down your debt STAT!
  • Temporarily Pause Your Other Savings – Now, let me be extremely clear: This step is optional and not right for every situation. However, if you can pay off your debt quickly (months rather than years), you might consider pausing your other savings goals and using the extra money to pay down your debt. Don’t put money in savings, stop saving for vacations (and don’t take them), and even hit pause on your retirement savings… for now. This money can help you supercharge your debt repayments and get rid of your debts at warp speed. Again, this is a temporary measure that only works if you follow through on destroying your debt quickly. Over the long-run, pausing your savings for a few months probably won’t hurt you too much. But if you don’t commit to paying off debt quickly, a few years could be a different story.

4 Steps to Using the Debt Snowball

OK. Let’s get to how the debt snowball actually works.

Your goal is to pay off one debt at a time, as fast as possible, moving from your smallest debt to your largest. The debt snowball picks up steam as you move along, allowing you to throw larger and larger payments toward your debt each time you eliminate one of them. Here’s how to set it up:

Step 1) Create a list of all of your non-mortgage debts, ordering them from the smallest to largest balance. Don’t pay attention to interest rates, original loan amounts, or the type of loan. Just order them by the current balance owed. (Note: Leave your mortgage debt out of the debt snowball, but pay the minimum payment throughout the process.)

Step 2) Set aside the debt with the smallest balance for now. (You’ll work on that next.) Then, make the minimum payments on all of your debts (except on the smallest one).

Step 3) Take the rest of your available funds, and pay every last available cent toward your smallest debt. Remember, you’re focusing on paying off one debt at a time… and you want to do it as quickly as possible. Don’t forget to use all of the extra money you found by starting a budget and cutting unnecessary expenses too! Chuck it at all at that smallest debt! The more you pay, the faster you’ll pay it off, and the better off you’ll be.

Step 4) Yay! You’ve paid off smallest debt!!! Take the money you were paying toward it, and use it to pay off your next smallest debt. (Don’t forget to include the minimum payment you were already making!) Like a snowball that picks up more and more snow rolling down a hill, you’ll gradually  make larger and larger payments toward your debt as you move from one debt to the next. Keep repeating the process, and you’ll eventually have them all knocked out!

Example of the Debt Snowball in Action

OK, here’s a quick example of how this works. Let’s assume you’ve created a budget, cut your expenses, and have $1,200 a month to use for repaying debt. You owe the following:

  • Car Payment – $17,000 total ($300/month minimum)
  • Credit Card #1 – $3,000 total ($75/month minimum)
  • Student Loan – $25,000 total ($250/month minimum)
  • Credit Card #2 – $1,200 total ($30/month minimum)

Using the debt snowball method, we want to focus on the card with the smallest balance first. In this case, that’s Credit Card #2. For the rest, we’ll pay the monthly minimum payments, which total $625 per month ($300+$75+$250). That leaves you with $575 a month to pay toward Credit Card #2 – meaning you’ll have your smallest balance paid off in about 2 months.

Once Credit Card #2 is eliminated, move to the next smallest balance – in this case, Credit Card #1. Now, you’ll take the payment you were making toward Credit Card #2 ($575) plus the minimum payment on the current card ($75) to pay a total of $650 a month. That should take you about another 4- 5 months to pay off.

After that, you can really start making huge progress on your car. Take the $650 you were paying toward your credit card, add the $300 minimum monthly payment on the car, and suddenly you’re paying $950 toward your car every month.

See how quickly this adds up? It should also be obvious that the more expenses you cut, the more money you can use to pay off debt, and the faster this process is completed.

The Debt Snowball: Final Thoughts & a Gift

Becoming buried under debt doesn’t usually happen over night. Getting out of debt doesn’t happen that way either. But by fully committing to the debt snowball method, you can end the perpetual cycle of debt and become deb- free (except for your house) within a matter of months – not decades.

I can’t tell you that it is easy. I can’t tell you that it won’t be painful. Certainly, I can’t tell you that it won’t take effort. But you can do this. You got this! Create your plan, commit to it, and stick with it. Remember, the pain is only temporary, but the debt snowball could help you get out of debt forever.

Before you go, be sure to grab your free gift! Use this link to pick up a free chapter of our book, Zero Down Your Debt.

Good luck and go get ’em!

What do you think of the debt snowball? Have you ever used it? Let us know in the comments below!

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  1. We’ve used this method to make a small emergency fund. It works that way as well. Make a budget, slash expenses, and toss the extra into a savings account. Once you have a chunk, put it into a higher interest account.

  2. This is exactly what we did to pay off our non-mortgage debt many years ago. I did first transfer as much of my card debt to the lowest interest rate card first which then made it the largest balance. Then did the snowball debt repayment method as you have described so well.

  3. Great overview of a good way to pay off debt. I feel debt payoff is more about behavior so seeing those small wins can really help. Paying off debts by highest rate will mathematically get you debt free faster, but many people can’t keep this up because they can get discouraged that the debts are not disappearing. To each their own but both ways are much better than just making minimum payments!

  4. Great example of tackling things one by one! It can feel quite overwhelming having a number of different places you need to put your money towards. This is a great way to organize and prioritize.

  5. I’ve been using the debt snowball for a couple of years now. It works. I’ve been able to pay off 4 debts in two years. I plan on doing more in 2017.

  6. Hi. I am new to your site. I will just try to do this method to overcome my 3000 thousands dollar debt. It is a small debt but I dont really know where my money goes every paycheck that i only make minimum payments to each credit card. I will use a budget and create an emergency fund as soon as possible. I am witness of how many time an emergency arises. Always I am not prepared for it. Thanks to you guys for your awesome knowledge and guidance.

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