Debt Repayment Method - Debt Snowballing

What is Debt Snowballing?

The debt snowballing method is a way to reduce your credit card, medical, taxes, and loan balances by re-paying the smallest debt first and leaving the largest bill to be paid last.

How Can I Snowball My Debt?

I suggest writing out all the debts owed and listing them from smallest to largest. You must know what you are working with financially before developing a plan. It will be a little painful, okay, a lot painful, but the goal is to understand your total money picture. Write down each minimum monthly payment as you list your debts from smallest to largest. I would suggest going all out and listing your interest rates as well.

Debt snowballing takes the payment from the last bill paid off and applies to the next smallest account. Once a debt is paid, you will add the previous amount to the next bill. For example, if credit card one minimum payment is $30 and the next card is $40, your new payment will be $70. You would continue only to pay the minimum payment for all the other cards. It allows the end-user to feel the excitement and instant gratification by tackling the debt seemingly faster. It helps keep the motivation alive for some rather than feel like they are not getting anywhere by paying on the highest interest balance first.

What About The Interest On My Largest Debt?

As you work on your smallest debt, your largest debt will continue to grow. Some may ask, what are the benefits if your largest bills will accrue interest? Does it not defeat the purpose of getting out of debt quickly? Using the debt snowballing method is to gain traction by feeling good about tackling the little debt first. With each debt paid off quickly, you would be more emotionally tied to the process than taking longer to pay a large bill with no real milestones. With consistency, you will be amazed at the results of using the debt snowball method, and you will be able to tackle debt faster than one can imagine.