How to Do a Debt Snowball

One thing about debt that brings a lot of stress is feeling helpless. A great way to feel more in control of your debt is to have a plan in place for how to tackle it. Even reading about methods and knowing you have the power to make a plan can make you feel more in control.  

One popular strategy for paying off multiple debts is the debt snowball. When you’re trying to get a handle on your debt, small wins can make a big difference—and that’s exactly what the snowball method is designed to do. While it sounds fanciful, the debt snowball method could be a powerful tool to help you stay motivated and on track while paying off your credit card debt. 

We’ll go over how it works, how you could implement it, and what it looks like in action, so you can decide if it might work for you.

How the Debt Snowball Method Works

The core of the debt snowball method is organizing your debts by balance size. Put your debt with the smallest balance at the top of the list. Next comes the debt with the second-smallest balance, and so on.

Now list the minimum payment for each debt. Compare the total of all your minimum payments to your budget. You’re looking for any spare money you can find, whether it’s cutting a streaming service while you pay down debt or cutting back on variable expenses, such as groceries. 

Last step: put any extra money in the budget you can use to pay off debt toward that smallest debt at the top of your list. When you laser-focus your efforts on a single balance, you should be able to clear it more quickly and celebrate the victory when you cross it off the list.

Once that first debt is paid off, take the entire monthly payment for that debt—the minimum payment, plus whatever extra you came up with—and roll it toward the next debt on the list. When that next debt is paid off, you move down your list and do the same thing.

Just like a snowball grows larger as it rolls downhill, your payment for your target debt gets bigger as you pay off smaller debts and roll your payments over. The ping of satisfaction when you close out a debt and move on to the next could help you keep the same payoff pace as you get to your larger balances.

A Step-By-Step Guide to Debt Snowball 

The debt snowball is simple to do, though it takes dedication. Here's a step-by-step guide for implementing it yourself:

1. List all of your debts.

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

3. Make the minimum payment for each debt.

4. Put all of your extra cash toward the debt at the top of the list. (Not sure how much money you can spare to pay off debts? Check out these tips for making a budget.)

5. Keep at it each month until the first debt is repaid.

6. Celebrate the win!

7. Take the entire payment you were making on the first debt and roll it over to the second debt on your list.

8. Repeat steps 5 to 7 until you've paid off all your debts.

The debt snowball method works best when you stop using your cards for new purchases. It will take much longer to pay off your cards if you keep adding to your balances.

Examples of the Debt Snowball Method in Action

Still not sure if the debt snowball would work for you? Take a look at some examples of how it could work for two hypothetical borrowers.

Example 1: Taylor

Taylor owes $10,000 in credit card debt, spread out like this:

Using the debt snowball method, Taylor immediately realizes that Credit Card E has the smallest balance at $500. So Taylor decides to make that the first target. Next, she arranges the rest of her credit card balances by size order:

1. $500, Credit Card E

2. $1,750, Credit Card A

3. $2,000, Credit Card D

4. $2,500, Credit Card B

5. $3,250, Credit Card C

Taylor would get the first $500 balance paid off for an easy win. Then, she’ll have the money she was paying on Card E to put toward Card A, which will help that card get paid off faster. Knocking cards off the list helps Taylor stay motivated to keep on track.

Example 2: Ryan

Ryan has $12,000 in credit card debt, spread out like this:

Under the debt snowball method, Ryan's debt list looks like this:

1. $300 balance, Credit Card C

2. $950 balance, Credit Card D

3. $2,750 balance, Credit Card B

4. $3,150 balance, Credit Card E

5. $4,850 balance, Credit Card A

Ryan can get two easy wins at the beginning, and pick up some speed as payments get rolled over. By the time he’s ready to hit the biggest debt, the payments from each paid off debt make progress much easier and faster.

Alternatives to the Debt Snowball for Getting Rid of Debt

The key to the debt snowball is making at least the minimum payment on each card, while adding extra to your focus debt. If you're already struggling just to pay your minimums, that may not be easy.

In that case, you might benefit from exploring other ways to get rid of your debt. Some options include:

• Debt consolidation. You use a new loan to pay off multiple smaller debts. It may reduce your monthly payments if you qualify for a lower interest rate.

• Debt settlement. You negotiate with your creditors to resolve your debt for less than you owe. You could DIY the debt settlement or go with a professional debt settlement company.

• Bankruptcy. Chapter 7 bankruptcy could walk away from your eligible unsecured debt if you qualify.

No matter how much debt you have, you still have options for taking control of your finances. If you're worried about doing it alone, contact a debt professional for help.