Debt Elimination Methods : The Snowball

The debt snowball is a powerful method for eliminating your debt more quickly, relying on a simple strategy of paying off your smallest debts first. It is not an appropriate course of action for people who are struggling to meet their repayments, but is useful for people who are basically solvent but have large amounts of debt hanging over them.

Starting The Snowball

The basic steps to setting the snowball in motion is to list your debts in order of size, starting with the smallest, and working out a budget that allows you to meet the minimum repayments on these debts each and every month.

debt snowball

Next, you need to find some extra money from somewhere which you can use to increase the repayment on the smallest debt. This needn’t be a huge amount, and should be fairly easily found through economizing on some aspect of your spending.

Once you’ve found this extra money, resolve to add this amount to your smallest debt repayment every month, while still making the minimum repayments on your larger debts.

Clearing The Smallest Debt

At this stage, it may seem that little progress is being made, but stick with it, and in time your smallest debt will be cleared. It’s at this point that the strength of the snowball idea becomes apparent. You now need to take the entire monthly repayment that you’ve been making on the now-cleared debt, and add that to the minimum repayment you’re already making on the next smallest debt.

This should bump up the amount you’re paying off on this debt quite dramatically, without changing your overall repayments. Once this debt has been cleared, you apply the same process to the next smallest debt, and so on until you’re completely debt free.

The beauty of the snowball method is that you’ll repeatedly experience the psychological boost of clearing a debt, however small, and as your repayments move up the chain the process of clearing debts gets quicker and quicker, giving you a real sense of being in control, in contrast to the ‘getting nowhere fast’ experience of trying to clear all your debts at once.