How To Use the Debt Snowball Method To Get Out of Debt

What Is the Debt Snowball Method?

The debt snowball method is a debt repayment plan that prioritizes your debt payments by paying off balances from smallest to largest. As each debt is paid off, the money is rolled into the next-smallest debt. Your payments get bigger over time, the way a snowball gets larger as it rolls downhill.

It’s a debt reduction strategy that won’t save you money on interest but could keep you motivated to pay off debt. Every time you pay off a balance, it’s a win. That little psychological boost could be the difference between staying on track or returning to being stuck and overwhelmed.

Benefits of the Debt Snowball

With the debt snowball method, you experience success faster. The satisfaction of seeing your debts eliminated one at a time keeps you focused and engaged. You’ll also improve your financial health and money management skills.

How To Start the Debt Snowball

Here are the steps to get your debt snowball rolling:

Step 1:  Make a List of All Your Debts, Excluding Your Mortgage

Create a spreadsheet or list with all your outstanding debts. Sort your debts from smallest to largest balance. The snowball method focuses on debt balances, so you don’t have to list your interest rates.

Step 2: Pay as Much as You Can on Your Smallest Debt

Every month, make minimum payments on all your debts except the smallest. Put as much money as you can toward your smallest balance.

Step 3: Repeat Until You Are Debt Free

After your smallest balance is paid off, take the amount you were paying on your smallest balance and combine that with the payment for the next-smallest debt plus any extra money you can come up with. Keep zeroing out your balances and rolling the monthly payments into the next debt.

Debt Snowball Example

Here is an example of what your debt snowball worksheet might look like:

Creditor Balance Minimum Payment
Medical Bills $750 $20
Credit Card Debt #1 $1,100 $31
Credit Card Debt #2 $1,800 $57
Car Loan $11,000 $380
Student Loans $20,000 $217

What About Interest Rates and the Debt Avalanche?

While the debt snowball strategy eliminates debt starting with the lowest balance, the debt avalanche method focuses on paying the loan with the highest interest rate first. By paying off the most expensive loans first, you pay less over time with the debt avalanche.

However, don’t underestimate the role motivation plays in getting out of debt. A Northwestern University study found that people with large credit card balances are more likely to pay off all their debt if they focus on paying off the cards with the smallest balances first.

If your highest balance also carries the highest interest rate, it could be many months before you pay off your first debt with the debt avalanche method. It’s discouraging and difficult to make sacrifices when progress is slow.

If you are patient, self-motivated, and prefer a purely mathematical approach, the debt avalanche will save you money in the long run. It will also get you out of debt faster.

If you want to experience wins faster and could use a psychological boost to keep going, the debt snowball could be better for you. Either strategy will eventually get you out of debt if you commit.

What About Debt Consolidation?

If you’re carrying a lot of high-interest debt, consolidating your debt could be a good payoff strategy. Getting a personal loan with a lower interest rate than you’re paying on your other debts could save you hundreds of dollars in interest. Options for consolidating your debts include:

  • A debt consolidation loan
  • Balance transfer credit cards
  • A home equity loan
  • Borrowing against your 401(k)
  • Debt management through a nonprofit credit counseling agency

Consider your options carefully and consult a financial professional. While you could save hundreds or even thousands of dollars in interest, these consolidation options can require good credit, come with risk, or affect your ability to get credit in the future.

Tips for Making the Debt Snowball Work For You

There’s more to the debt snowball than making debt payments. It requires change and dedication as well. The following tips will help you make it work:

1. Cut Spending

With the debt snowball strategy, you want to make more than the minimum payment on your smallest debt. That is the key to getting your snowball rolling.

Look over your monthly budget, bank statements, and credit card statements from the previous two to three months. Review your bills and your spending habits. Find ways to reduce or eliminate expenses.

Put any extra cash you free up toward your smallest debt.

2. Generate Extra Income

If you’re at a point where you can’t cut spending any further, coming up with additional money could provide the extra funds you need to get out of debt as soon as possible. To raise extra money, you could:

3. Put Any Windfalls Toward Your Debt

You can also apply any extra money or unexpected income to your debt repayment plan. Use the money from a tax refund, year-end bonus, or inheritance to get out of debt faster.

4. Use Your Extra Paycheck

If you get paid every two weeks, you get 26 paychecks per year. Most months, you receive two paychecks, but twice a year, you get three checks in a single month. If you budget for those three paycheck months based on your usual two paychecks, you put an entire paycheck toward your debt snowball.

5. Don’t Take on Additional Debt

No debt-reduction strategy will improve your financial situation if you keep using your credit cards and taking on new debt. Commit to living within your means, staying within your budget, and paying for things in cash. Cut up your credit cards, freeze them in a block of ice, or do whatever you must to avoid more debt.

6. Pay Bills on Time

Paying bills late subjects you to late payment fees and penalty interest rates. That keeps you in debt longer. Not paying on time also lowers your credit score.

7. Set Money Aside for Emergencies

Having some money put away in case of an emergency could save you from ruining your debt payoff plan or taking on more debt. Financial guru Dave Ramsey’s emergency fund advice is to build a starter emergency fund of $1,000 before you begin paying off debt aggressively with the snowball method. Once you’re out of debt, you can work on having a fully funded emergency fund of three to six months’ worth of expenses.

Is the Debt Snowball Right for You?

The debt snowball plan works best for people who want a debt repayment strategy with quick wins and emotional boosts along the way. It might not make the most mathematical sense, but you will close out balances faster, which should help you stay on track. And sticking to the plan you choose is the key to getting out of debt, taking control of your financial life, and getting on the path to financial freedom.

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Jerry is a personal finance enthusiast, side hustler, and freelance web developer who began his career in financial services. He co-founded, a personal finance and frugal living blog. His insights have appeared on MSN,,,, and many others.