Saying Goodbye to Your Debt: What Is the Debt Snowball Method and How Does It Work?

The average American is over $90,000 in debt. This includes everything from home mortgages, car loans, school loans, credit cards, and more.

Borrowing money can be necessary, especially for buying a home. However, that doesn’t mean we have to live in debt all of our lives. The key is to learn how to borrow money wisely. 

Just as importantly, you need to take appropriate steps to pay off debt before it consumes your entire budget. One of the most effective strategies is the debt snowball method. We’re here to walk you through the process and guide you to financial freedom.

The Debt Snowball Method 

The debt snowball method is one of the most popular debt pay-off strategies. Simply put, it’s designed to pay off one debt at a time, starting with your smallest debt. However, there’s a lot more to it than that if you want to do this thing right. 

Let us explain.

Understand Your Debt Situation

The first step in getting rid of debt is taking a good hard look into your finances. Make a list of all of your debts with the smallest debt first. Make sure you write down the name, minimum payment, and total amount. 

This will give you a good overview of your financial situation. We recommend using a spreadsheet so you can update your numbers each month. 

Make Minimum Payments on All of Your Debts

If you haven’t already, set up all your debt payments with automatic transfers, contributing the minimum amount to each. This will prevent any accidents, such as forgetting to make a payment or making late payments. Late payment fees can set you back in your progress. 

Find as Much Extra Money as Possible in Your Budget

Now comes the part of the debt snowball method that requires discipline and sacrifice. You need to find as much extra money in your monthly budget as possible. Here are some suggestions to save on expenses:

  • Put yourself on a tight budget
  • Stop eating out
  • Don’t buy coffee from coffee shops
  • Limit yourself to a single TV/movie streaming service
  • Cancel your cable subscription
  • Stop shopping online
  • Cancel unnecessary memberships and subscriptions

If you’re still having trouble increasing your monthly savings, consider debt consolidation options. Consolidating your debt can clear up a lot of space in your budget. 

Put All Extra Money into Your Smallest Debt

Each month, after making all of the minimum payments on your other debts, put everything you have left (after other bills and obligations) into your smallest debt. This is where are those cost-cutting sacrifices come into play. Even if you’re only contributing an extra $50, it will help you pay that debt off faster. 


Once your first debt is paid off, you simply repeat the process. However, you now have the extra money you’ve been saving each month plus the minimum payment that was going toward the first debt. Thus, your debt snowball grows.

For example, if your smallest debt had a minimum payment of $75 and you were able to save an extra $100 a month by cutting back on expenses, you now have an extra $175 to put toward your next smallest debt every month.

When that debt is paid off, you’ll have an even bigger snowball to throw at the next debt in line. This is the beauty and elegance of the debt snowball method.

Looking for More Financial Advice?

Though it sounds like hard work and sacrifice, each debt you pay off will be a small victory with the debt snowball method. Each victory will release weight from your shoulders and you’ll be one step closer to financial freedom. You may be surprised by how exciting the process becomes. 

And if you need a little more advice on financial management, we’re here for you. Check out some of our other articles before you go for more tips on earning more, saving more, and spending less.