Turbo Takeaways
- The debt snowball method focuses on paying off smaller balances first to build motivation and consistency.
- Each debt you clear frees up more money to tackle the next, accelerating your path toward becoming financially independent.
- This self-managed approach can simplify repayment and help rebuild financial confidence step by step.
What Is the Debt Snowball Method?
Debt snowball is a self-managed debt relief method that pays balances in order from smallest to largest. Depending on how much you put aside each month for payments, your debt payoff keeps “snowballing” into a larger amount, helping you eliminate debts faster.
Since repaying debt is usually a long process, quickly paying off small debts motivates consumers to keep working toward financial freedom.
How Does Debt Snowball Work?
Made popular by financial author and speaker Dave Ramsey, the debt snowball method is a DIY approach to debt relief that can yield big results if you commit to making consistent debt payments.
- Make a List of All Your Debts
Rank your debts from smallest to largest, regardless of interest rates. Determine how much you can put toward monthly debt repayments after paying your essential bills. - Focus On Paying Smallest Debt First
Begin paying off the smallest debt on your list. Put all your funds toward that account, except what you need to make the minimum payments on your other debts. - Cut Costs to Pay Faster
The more you can cut trivial expenses from your budget and funnel extra income toward getting out of debt, the faster you’ll pay off your balances. - Move to Next Smallest Debt
After paying off the smallest balance, allocate all your money plus the previous minimum payment toward the next smallest debt. - Keep Going
Continue making payments this way until you eliminate every debt on your list. Congratulations on achieving your goals!
Example of Debt Snowball
To get a better idea of how the debt snowball method works, here’s a hypothetical plan for paying off debt. Let's imagine a customer named Nancy decides to start eliminating debts using the snowball method.
Nancy cuts back on extra spending and determines that she can pay $800 a month toward her debts after covering other expenses with her income.
- Nancy's first action is to pay down as much as possible on her medical bill (the smallest debt) while maintaining minimum payments on her personal loan and credit card.
- Once her medical debt is fully paid, she can allocate more funds toward her personal loan (next lowest debt) while still making minimum payments on her credit card.
- Having paid off her personal loan, she can now put the $800 toward her credit card debt, snowballing her repayment plan and clearing her debt in about 20 months.
Debt Snowball vs. Debt Avalanche
The debt avalanche method is the opposite strategy to the snowball. In debt avalanche, you work to pay off debts in order from the highest interest rate to the lowest, whether the debt amount is large or small.
Since you’re paying off higher interest debt, the first payoff typically takes a long time, often up to 24 months. However, some consumers prefer using the avalanche method to save money in interest and knock out the biggest fees first.
Both of these methods appeal to consumers who want to manage their own debt without paying fees to an organization.
Debt Snowball vs. Other Debt Relief Methods
Here’s a look at how the debt snowball method compares to other top debt relief programs:
| Debt Relief Method | How It Works | Payment Structure | Fees Attached | Average Time of Completion |
|---|---|---|---|---|
| Snowball | Debts prioritized and paid off from smallest to largest balance | Budget for monthly debt payments after meeting expenses | None | Varies |
| Management | Organization manages monthly payments to creditors | Monthly payments sent to organization to cover all debts | Enrollment fee plus monthly fees for each managed account | 24-48 months |
| Consolidation | Rolling multiple debts into a single new loan at a lower interest rate | Loan amount large enough to cover current debts broken into monthly payments | Interest payments | 24-48 months |
| Settlement | Debt balances reduced by settling with creditors for a lump-sum payment | Monthly payments deposited into savings account until enough for lump-sum payoff | 15%-25% of total debt enrolled after settlement | 24-48 months |
The debt snowball may be the most effective option if you can stay motivated and manage your own debt burdens. But before you start snowballing, you should consider other debt relief solutions like debt settlement or consolidation to ensure you choose what’s best for your financial situation.
Tips to Make Debt Snowball Work
If you're interested in making the most of your debt snowball plan, here are some helpful strategies to help you maximize its benefits:
Save More Money
The more money you can funnel toward debt repayment, the more effective debt snowball becomes. Start by saving more of your income by limiting unnecessary spending. Make choices like eating out less, shopping sales, and delaying big purchases.
Cut essential expenses where you can by comparing rates for insurance and services like phone and internet. Consider starting a side hustle to monetize your talents and hobbies, or finding part-time or seasonal work.
Map Out Your Plan
Committing to a debt snowball plan becomes more manageable if you outline clear goals for your financial success. Write or create a digital outline of each debt you want to conquer, including the total balance, any interest or fees associated with the account, and how much you plan to pay each month.
Update the plan whenever you pay off a debt, but keep a record of what you eliminate to track your progress and stay motivated.
Apply It to the Right Debt
The debt snowball method works best for unsecured debts and small secured debts that are easily paid off in a short time. That’s why debt snowball isn’t typically used for mortgages, which can be paid at a low-interest rate over many years.
Debt snowball can work to effectively clear debts from credit cards, medical bills, personal loans, and car loans.
Stay Motivated
Review your financial goals regularly to stay on track for success. Focus on why you’re trying to pay off debt and what you’ll do with the extra money once you’re done. Stay educated on financial topics that teach you to be a savvy consumer.
Once you get that snowball rolling, watching your debt repayments increase can be the best motivator.
Celebrate Success
Acknowledge a win each time you pay off a small debt. Find a way to celebrate that boosts your confidence without spending too much of your hard-earned income. Share your progress and success with friends and family.
Remember what it feels like to lighten your debt burden so you stay committed to your plan. You can even try what Ramsey calls the “debt-free scream” and shout to the world what you’ve done.
Get Debt Relief Help With TurboDebt®
Even after snowballing small balances, you may find big, high-interest debts like credit cards harder to manage. Working with a debt relief organization like TurboDebt® can help you overcome large balances faster.
With thousands of 5-star reviews across Trustpilot and Google, TurboDebt is a proven partner for reducing debts.
It only takes a few minutes to find out if you qualify for our debt relief program. Contact us today to start your journey toward financial stability.