Home Debt What Is the Debt Snowball Method? It’s Not What You Think

What Is the Debt Snowball Method? It’s Not What You Think

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Got a snowstorm of debts? Try this.

Key points

  • Many, many people are in debt.
  • Credit card debt in particular can be insidious, as cards are often easy to get and make paying for your costs convenient and safe.
  • If you’re ready and able to pay off your debts, consider snowballing them.

Being in debt sometimes feels inevitable if you’re a regular person in America. You’ll likely take out a loan to buy a car, buy a home, maybe even to start a business. And one (or possibly several) sources of potential debt could be sitting in your wallet as you read this — your credit cards. Credit cards are extremely convenient and offer both greater security for your money as well as the ability to earn money back (and other rewards) on your spending, so it makes sense that they’re so popular.

Unfortunately, since credit cards can be easy to get and are unsecured (meaning, they’re not tied to a specific asset, the way your mortgage loan is secured via your home), it can also be easy to get in over your head with credit card debt. This is especially true after this last year of rampant inflation forced so many Americans to rely on credit cards to keep their heads above water. And carrying credit card debt is expensive, often coming with interest rates of 20% — or higher.

If you’re staring down some debt to pay off, you have options for tackling it. If you’d rather have just one monthly payment and have pretty strong credit, you could opt for a debt consolidation loan. Or you could pay off your balances one at time, starting with the highest interest rate debt you have. This could get discouraging if you’re not seeing a lot of progress quickly, though. What if there was another way?

The debt snowball method

If you want to get up close and truly personal with your debts, and have many opportunities to celebrate your progress as you pay it off, you should consider the debt snowball method. This doesn’t actually describe the way debts can sometimes creep up and “snowball” on you, the consumer. Rather, the debt snowball method is an easy way of “snowballing” the money you’re putting toward your debt. It’s a great way to deal with a “snowstorm” of debts and corresponding payments — and you get to watch them disappear, one by one.

You create your debt snowball by figuring out how much each debt balance is, and then by making minimum payments on all but the smallest balance. You pay as much as you can on that smallest balance, knocking it out fast. Then you take the money you were spending monthly on that payment and roll it to the next smallest balance, and keep making those minimum payments on the rest. By the time you’ve paid off all but your largest balance, your monthly payments are large indeed, and you can get out of debt faster than you may imagine — with plenty of points along the way where you can crank up Queen’s “Another One Bites the Dust” and celebrate slaying another debt (trust me when I say it feels good).

Is snowballing your debt right for you?

This method worked extremely well for me in 2022, and it’s worked for many other people, but it certainly isn’t a fit for everyone. For one thing, you may be extremely stressed out by having to manage so many monthly payments in the course of paying off debt. In that case, consolidating your debt will make life a lot easier for you. And the debt snowball method will end up costing you more in your debt payoff, because you’re ignoring the interest rates on your debts. If you’d rather save a little money in paying off debt, you should consider the debt avalanche method instead, as in that payoff plan, you’ll focus on your highest-interest-rate debt first.

In paying off debt, as in many aspects of your financial life, you have choices. The debt snowball method of debt payoff is a good way to give yourself opportunities to see progress (and celebrate) while you whip your finances into shape, so if that sounds good to you, give it a try.

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