Debt can be a heavy burden that harms your financial well-being and also creates a lot of stress and anxiety. Whether it’s credit card debt, student loans, or other outstanding balances, finding a way to get out of debt is no easy task. But there are effective strategies to help you knock out your debt and regain your financial freedom. One method that works well for a lot of people is the Debt Snowball method.

The Debt Snowball method focuses on paying off debts by starting with the smallest balances first, without considering interest rates (which is the focus on the Debt Avalanche method). You start by making a list of all of your debts, from smallest to largest, and making minimum payments on all of them except the smallest. Any extra money you have left is then put toward the smallest debt. Once the smallest debt is paid off, the amount that was previously allocated to it is added to the payment for the next smallest debt. This process continues like a snowball, with the payments growing larger as each debt is paid off, until all debts are eliminated.

Here’s how to get started with the Debt Snowball method

1. Make a list of all of your debts

Begin by creating a comprehensive list of all your outstanding debts, including credit cards, personal loans, student loans, and any other debts you owe. Note the outstanding balance, minimum monthly payment, and interest rate for each.

2. Sort debts by balance

Organize your debts in ascending order based on their outstanding balances, starting with the smallest balance and ending with the largest.

3. Focus on the smallest debt first

Allocate any extra funds available for debt repayment to the smallest debt while making minimum payments on all other debts. This may involve cutting back on discretionary spending or finding ways to increase your income.

4. Celebrate the small wins

As you pay off each debt, celebrate your progress! The sense of accomplishment from clearing a debt is a great reward for your newfound responsible financial habits, and that will help you stay motivated to continue your debt repayment mission.

5. Snowball your payments

Once you’ve paid off the smallest debt, take the amount you were paying toward it and add it to the minimum payment for the next smallest debt. This “snowball effect” increases the payment for the next debt, allowing you to tackle it with more money and pay it down faster.

6. Keep it going

As you pay off each debt, snowball the payments to the next smallest debt on your list. Repeat this process until all debts are paid off.

Benefits of the Debt Snowball Method

1. Stokes motivation

The Debt Snowball method provides a psychological advantage by giving you the satisfaction of quick wins. Paying off the smallest debts first provides a sense of accomplishment and can help reinforce your commitment to the debt repayment journey.

2. Builds debt-crushing momentum 

As each debt is paid off, the snowball effect builds momentum, allowing you to tackle larger debts with increased confidence and determination.

3. Easy to adopt

The Debt Snowball method is simple to implement and easy to understand, which means that just about anyone can get started with it and start reducing debt right away.

4. Boosts discipline

The steady progress and clear plan of the Debt Snowball method foster discipline in managing your finances. It encourages you to stick to your debt repayment plan and avoid new debt accumulation.

5. Creates a Snowball Fund

As you pay off debts, the snowball effect generates a sum of money that can be allocated to debt repayment, leading to bigger payments toward larger debts.

Tips for Success with the Debt Snowball Method

1. Create a budget you can stick to

Developing a budget is essential for managing your finances effectively. Allocate a portion of your income to debt repayment, making sure that you also have enough money to cover other essential expenses.

2. Minimize unnecessary spending

To accelerate your debt repayment, find the areas where you can cut back on spending that isn’t essential. Instead, apply that money to your debt snowball payments.

3. Consider additional income sources

Explore opportunities to increase your income, such as taking on a part-time job or freelancing. Using this extra income exclusively for debt repayment can expedite your progress. A great place to find flexible side hustles is the Earn and Save section of the Brigit app.

4. Stay focused and committed

Becoming debt-free requires focus, dedication, and perseverance. Keep your eyes on your financial goals and stay committed to the debt snowball plan.

The bottom line

The Debt Snowball method is a powerful and effective strategy for eliminating debt systematically and achieving financial freedom. By focusing on paying off the smallest balances first and then snowballing the payments towards larger debts, individuals can build momentum and stay motivated throughout their debt repayment journey. The simplicity of the Debt Snowball method makes it accessible to anyone seeking to become debt-free. With discipline, commitment, and a well-structured plan, the Debt Snowball method can help people overcome their debts and pave the way to a brighter and more financially secure future.