How to Use the Snowball Method to Pay Down Debt

What Is the Debt Snowball Method?

The debt snowball method is a way you can pay off your bills from smallest to largest. Just like when you create an actual snowball, the snowball method gains momentum and goes toward your bigger bills as you keep going. After you pay off the small bills, you can roll those payments into the amounts you put toward your big bills.

How Interest Rates Affect the Snowball Method

Some of the bills you have may have added interest. It could be simple interest for something like a mortgage loan, or compound interest for something like, student loans. No matter what type of interest your bills have, you can use the debt snowball method. Interest won’t determine whether or not you’re successful in paying off your debt, but it may affect the length it takes you to become debt free when using the snowball method.

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How to Use the Snowball Method to Pay Off Debt

You won’t need a ton of money to use the debt snowball method, but the more patience you have, the better you’ll be able to work the method. Unlike more complex debt-reduction methods, you can start clearing out debt using the snowball method in four steps before repeating the process as much as necessary.

1. List your bills from smallest to largest.

Make a list of all the debt you make payments toward each month. This shouldn’t be bills that you pay in their entirety, like your cell phone bill or home internet bill. This list should contain debt that you’ve been working on paying with time. List the debts from smallest to largest, no matter what their interest rates are.

2. Make minimum payments on all your bills except the smallest one.

Ignore the smallest bill you have on your list for this step. Make the minimum payment on all your other bills so that you’re continuing to have on-time payments each month while paying down those debts.

3. Pay as much as you can on your smallest bill.

Now that you’ve taken care of the larger bills, you can focus on the smallest one that you put aside. Check your monthly budget and see how much spendable money you have left. Use that amount to gauge what’s the highest possible amount you can afford to pay on your smallest bill. Pay the amount that you decide—it should be higher than the minimum payment required, if possible.

4. Repeat the process until you’re debt free.

Once you pay off your smallest debt, you should start the process again. Move on to the next smallest debt on your list, and make sure to account for any new debts you may have acquired. When you get to the larger bills, you’ll be able to pay more toward them by using money that would’ve gone toward the once existing smaller bills. Keep working through these steps until you’re debt-free.

How to Stay Patient While Using the Debt Snowball Method

While you won’t need a lot of money when using the debt snowball method, you may need a lot more time than you’re willing to give. Debt that has compounded interest, like student loans, accumulate a little more debt as long as you have them and can take longer to completely pay off. It’s important to stay the course though. Keep your favorite-colored pen next to your list of bills and scratch out each debt as you pay them off. You can use your list as a visual motivator to keep using the debt snowball method. Check your list every 30 days to see what progress you make as time goes on.