Let’s face it, debt sucks. It’s so easy to get into debt. In fact, American households owe on average around $16,000 in credit card debt. Once you get into debt it can feel impossible to get out of.
To date, my husband and I have paid off over $30,000 in debt, including our car, a credit card, and some student loans. It has been a long journey, and we still have over $100,000 to pay off. So I understand how overwhelming debt can feel.
Not only does it feel difficult to get out of debt, but it can also feel like it takes an eternity. Furthermore, it can be overwhelming trying to decide where to start. Enter the debt snowball.
What is the Debt Snowball?
The debt snowball is a simple method of paying off your debt created by Dave Ramsey where you pay off your debts in order of smallest to largest. As you pay off the smaller debts, the money you were paying toward those debts goes to the remaining debts. Get it? It’s like a snowball, which starts out small and then grows as you roll it down a hill.
Eventually, you reach the bottom of the hill and your debt is gone! Unfortunately, your snowball is too, but that’s OK. 🙂 This is the method I’ve been using to tackle our student loan debt and I love it.
How is the Debt Snowball Different Than the Debt Avalanche?
The debt avalanche is another method of paying off debt where you target the debts with the highest interest rates first. While there is some argument that the debt avalanche is superior to the debt snowball, the potential interest savings may not outweigh the potential pitfalls, which include:
- Hard to stay motivated
- Feeling like it takes too long to pay off the highest interest debt
If you’re torn between the debt snowball and the debt avalanche method, check out this handy online calculator which shows you the impact of both.
Why is the Debt Snowball So Great?
The debt snowball is really the simplest way to address your debt. It doesn’t take interest rates, debt type, or anything other than the size into account. It addresses the debts from smallest to largest, allowing you to quickly pay off your smallest debts. Those debts are gone forever! There is something immensely satisfying about paying off debt, and the debt snowball gives you many victories early on.
Using the debt snowball method doesn’t require any special knowledge or techniques. It’s simply about behavior modification and working hard to eliminate debt. Anyone can use this method and be successful. This is my preferred method of paying off debt because it rewards you early and often, making it easier to hang in there once you get to the larger debts.
How do I Use the Debt Snowball Method?
It’s easy to start your debt snowball! All you need to do is list your debts from smallest to largest, and the minimum payment for each.
Apply any extra money you have to the smallest debt first until it is paid off.
Once the smallest debt is paid off, pat yourself on the back! Then you’ll take whatever you were paying each month as a minimum payment on that debt and apply it to the next one.
Each time a debt is paid off you apply that amount to the next debt. You just continue through the list until you reach the end. At the end of the process, you should be debt free! Hurray!
How do I Stay Motivated?
Even using the debt snowball it can be extremely difficult to stay motivated while paying off debt. I haven’t just been there, I am there, so I understand. I love to read about the experiences of others to stay on track. studentloanhero.com has a great article about a young woman who used the debt snowball method to pay off $36,000 in debt.
Another thing that keeps me motivated is having a budget that includes a place where I track my debts and when they will be paid off. If you’ve never made a budget, check out my post about how to make a budget in six easy steps.
Finally, if you’re struggling with motivation, just think of how great it will feel to have all your debt paid off. We have become so numb to having debt in today’s world that we forget how great life would be without it!
The debt snowball has been transformative for me, and I hope it works for you too! I’m currently using the debt snowball to pay off just under $60,000 in student loans. If you want to follow along, please subscribe to my blog. 🙂 I’d also love to hear your own stories about how you used the debt snowball method to get out of debt for good!