What is a Debt Snowball? + Debt Snowball FAQ

Brent Pittman —  08/08/2012
Pushing Debt Snowball

Photo credit Caleb’s Photography.

So you want to pay off debt? Want to really find freedom from your debtors and be able to use your money how you choose?

It’s not an easy road ahead, but you can do it! Most pay off their debt in 18-24 months, not counting their mortgage.

I can tell you from experience that being debt free is awesome! Before you begin down this debt free road, save your $1000 starter emergency fund, so you won’t have to use debt when trouble comes.

You’re on a budget right? If not, start budgeting like a pro as you learn how to beat debt using the debt snowball. Don’t forget to eat and pay the rent before you attack debt.

What is a Debt Snowball?

The debt snowball is a simply a system to organize and systematically pay off your debt. It’s a plan.

Have you ever rolled a snowball down a hill? What happens? It gets larger and rolls faster. That is exactly what will happen when you use the debt snowball method. No, your debt won’t grow, but the payoff momentum will speed up exponentially.

How to Use the Debt Snowball?

Organize your debt from smallest to largest.–Don’t worry about interest rates. (see FAQ)

Go ahead list them out. It might actually help you feel more comfortable about the debt dragon you’re facing when you put it on paper. Example:

Make Minimum Payments on all debts. If you have any money left over from budgeting beyond minimum payments, apply this towards your smallest debt.

In our example you’ll be making $825 total in mininum payments. If you make that $826th dollar it is applied towards your credit card #1 as extra.

Payoff your Smallest Debt- This might take some time. You might need to increase your income or sell some stuff to get this snowball moving.

Roll Your Snowball – After you’ve paid off your smallest debt apply the minimum payment you just paid off toward your next smallest debt.

In our example after you pay off credit card #1, apply that $45 towards credit card #2 + the $55 you were already paying for a total of $100.

Now you’re rolling! With those extra payments your time in debt will dramatically decrease and the amount of interest you’ll pay will shrink too.

Keep Rolling- Keep rolling up your debt payments until you’re done. It will happen faster than you think! The hardest part is getting the ball to roll.

Inspire Others- When you’re debt free tell everyone and send me your debt free stories, so I can add you to this list of debt free stories.

Large Snowball

Getting out of debt is better with friends! Photo credit  kamshots.

Debt Snowball FAQ

What about the interest rate? [common sense answer] The reason to pay down your smallest debt first without regard to interest rate is to get a quick feeling of success. Eat the hushpuppy now and save the elephant for last. If you don’t succeed quickly, you’ll give up.

No, seriously what about the paying off the highest interest rate first[2nd answer] Most families pay off their debt in 18-24 months, so the math shouldn’t really make much difference. Behavior change trumps math when it comes to beating debt–Don’t believe me? Read the research.

I still think I should pay off my highest interest rate first. What do you say to that? [last time I promise] Hey, so if you’re really into paying off the highest interest rate first, go for it. Find a system that works for you and stick to it.

What about transferring my debt to 0% balance cards? Realize this is a band-aid to your bigger debt problem, but it can provide some relief. Just make sure the fee (if any) you’re charged for transferring is worth leaving your old card.

I don’t have extra money for my debt snowball, what do I do? You’ve got an income problem. You need to make more money.

What about Payday LoansIf you’ve got payday loans, sound the alarms and work 24-7 until you pay those jokers and never take a payday loan again. Yes, put payday loans at the top of your list no matter the amount.

What about my MortgageSave your 1st mortgage till you pay off the rest of your debt down, save your 3-6 months emergency fund, start retirement and kids college savings.

I’ve got a 2nd Mortgage. Should I add this to the snowball? If your second mortgage is less than 1/2 your income, then include it in your snowball.

Should I add to retirement while in debt? If it looks like you’ll be out of debt in less than 5 years, and you still have years to work-then yes. Stop adding to retirement and focus your income and energy towards debt. If it looks like decades before you’ll be out of debt, then you probably have an income problem or a special situation that requires a longer answer.

Where does IRS debt go in the debt snowball? If you’ve got IRS debt, put it on priority and don’t default, the IRS doesn’t play around.

Will I ever be debt freeYes, keep working your extra job and paying off debt. Need inspiration? You too can pay off $100,000 of debt!

Why not just declare bankruptcyBankruptcy is not the cure, its usually a symptom and you’ll find yourself back in debt if you don’t fix your basic budgeting and overspending issues.

Have you used the debt snowball method to get out of debt? 

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Brent Pittman

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Brent is a financial coach and writer looking for the perfect donut. He believes personal finance should be both fun and accessible to anyone willing to learn.
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  • Maria,
    Great to hear! I wasn’t worried about you at all, but the millions who get involved in consolidations each year and end up paying more than by keeping debt separate. It may work out better, but the calculator will show you which way to go.

  • This is an interesting concept. I like anything that tricks you into paying off your debts systemtically! I do think I would put more emphasis on interest rates – but I see what you’re trying to do with building confidence over straight math.

  • The problem with consolidation, at least in the U.S., is you have to be careful not to roll 0% or low % debt in with higher % debt. You’ll have to pull out the calculator to ensure you’re not taking on more interest and thus debt by consolidating.

  • You are one motivated and driven guy! Most need the feeling of success as they pay off smaller debt first.

  • AverageJoe

    I was lucky that I didn’t have to use this method, but I used it often with people who needed psychologically to “get it” with their debt. It works brilliantly. Great write up.