3 Examples of How to Use the Debt Snowball Method for Debt

Research is a great first step to making a plan to deal with your debt. Learning how the debt snowball method works may help you decide if it's the right strategy to help you become debt free.

We'll go over the basics of the debt snowball method, then focus on three examples to show you potential real-world scenarios. Let's get started.

How the Debt Snowball Method Works

The debt snowball method is simple to execute. Here's how it works:

1. Make a list of all your debts, including balances and minimum payments.

2. Organize the debts by the size of the balance, with the smallest balance at the top of the list.

3. Make all of your minimum payments.

4. Put any extra money toward the debt at the top of the list with the smallest balance.

5. Once you pay off the first account, add that money to the payment for the next debt on the list.

6. Rinse and repeat.

7. Pay everything off and celebrate!

Sometimes it helps to see something in action. Let's explore three different examples of how the debt snowball could look in practice.

Example 1: Creating Motivation with Easy Wins

Alex has a total of $40,025 in debt between cards and loans, like this: 

Alex can afford all the minimums, plus an extra $200 to put toward debt each month. But while Alex wants to pay off the debt, figuring out the best plan is a bit overwhelming and the idea of taking years to be debt free is disheartening. 

So, Alex decides to try the debt snowball method in hopes it will help with motivation and organization. Under the debt snowball method, Alex would prioritize the debts like this:

This means Alex starts paying all the minimums, then putting the extra $200 a month toward Credit Card 1. Combined with the $35 minimum on that card, Alex puts a total of $235 toward Credit Card 1 in the first month.

Next month, Alex pays off Credit Card 1 with $40 of the $235, then puts the remaining $195 toward the Store Card, the next debt on the list. The next month, Alex pays the $45 minimum on the Store Card, plus the $235 extra. With the extra money, Alex pays off the Store Card in four months.

Paying off two accounts in the first six months lets Alex see real progress. This helps Alex stay motivated to keep going. Plus, each account paid off means more money going toward the next debt on the list, letting Alex keep up that momentum.

Example 2: Wrangling Credit Card Debts

Ryan is juggling $34,450 in debt across four credit cards and one store card, like this:

With so many cards, balances, interest rates, and payments, Ryan simply doesn't know where to start. Ryan settles on the debt snowball method since it's simple to follow and could help with getting back in control.

Under the debt snowball, Ryan's debts are prioritized this way:

Ryan can afford to make the minimum payments, plus an extra $500 a month from getting a weekend side hustle. This means it only takes Ryan two months to pay off Credit Card 4, and that quick win feels great!

Adding the minimum from Credit Card 4, the minimum from the Store Card, then the extra $500, Ryan starts paying $605 a month in total toward the Store Card. It only takes another four months to knock that debt out, leaving Ryan with just three credit cards to go.

By the time Ryan gets to Credit Card 2 with the largest balance, all of the money that was going toward the other debts can now go to Credit Card 2. That means Ryan can put more than $1,500 a month toward the balance, paying it off surprisingly fast.

Example 3: Paying Off Multiple Types of Debt

Jessie has $31,675 in unsecured credit card and loan debt, plus $285,750 in secured debts (debts backed by collateral, or something of value—in this case, Jessie's car and home). They look like this:

Jessie dreams of being totally debt free and has an extra $500 a month from a recent raise to dedicate to that goal. Jessie picks the debt snowball method because those big balances are intimidating, and the debt snowball lets Jessie build up to them.

Using the debt snowball, Jessie's debts gets organized by balance size: 

With $500 extra each month, Jessie is able to knock out that pesky Store Card in the first month. Then it only takes four more months to pay off the next account on the list, Credit Card 2.

After that, Jessie moves on to Credit Card 1. The minimums from the previous accounts, plus the extra $500, mean Jessie is able to pay $741 each month toward Credit Card 1 until it's paid off, so the balance drops quickly.

The Medical Loan goes even faster. When Jessie hits the five-figure balances, the amount of money available to go toward the Personal Loan every month is over $1,000, so payoff goes faster than Jessie ever thought possible. Soon, Jessie only has secured debts to focus on—and a lot of extra money in the budget to do so.

Any Way You Get Rid of Debt Is a Win

The debt snowball method works well for a lot of people—but it's not for everyone. Maybe you're more of a debt avalanche person who wants to cut interest costs. Perhaps you're more interested in consolidating your debts so you have fewer due dates to track.

Or maybe you're already having trouble just making your minimum payments. In that case, negotiating for debt settlement with your creditors or filing for bankruptcy might be a better next step.

Consider reaching out to a credit counselor, financial advisor, or debt professional to help you make a plan. Freedom Debt Relief offers free consultations to see if debt settlement could be the right fit.