What could you do if you didn’t have a single debt payment in the world? That sounds nice, doesn’t it? For some of you, that would free up and extra $300, $500, or maybe even $800 you wouldn’t have to be throwing at minimum payments each month. Ah, that’s the debt-free life.
So how do you make this dream a reality? You need to work the debt snowball and follow the plan for paying off your debt once and for all. Take control of your money instead of watching your hard-earned cash disappear month after month.
Myth: You need to pay off the debt with the highest interest
rate first to get out of debt quickly.
Truth: You should knock out the smallest debt first to create
momentum in your debt snowball.
What Is the Debt Snowball Method?
When you begin, you’ll start working on your debt snowball. This means you’re current on all your bills. The debt snowball method helps you stay motivated while paying off your debt by starting with the smallest debt and working your way up to the largest.
But wait. Doesn’t it make sense mathematically to pay on the debt with the highest interest rate first? Wouldn’t that save you the most money?
Maybe. But if you begin with the biggest one, you might think you’re not making fast enough progress, lose steam, and quit before you even get close to finishing. It’s important to pay your debts in a way that keeps you motivated until you’ve wiped them all out. Those quick wins will pump you up!
And that happens when you start with the smallest debt. List all your debts (except the house) smallest to largest. Now it’s time to get rid of them ASAP with the debt snowball.
Here’s How the Debt Snowball Works
Step 1: List your debts from smallest to largest.
Step 2: Make minimum payments on all debts except the smallest—throw as much money as you can at that one. Once that debt is gone, take its payment and apply it to the next smallest debt while continuing to make minimum payments on the rest.
Step 3: Repeat this method as you plow your way through debt. The more you pay off, the more your freed-up money grows—like a snowball rolling downhill.
