The Mom on a Budget

Budgeting to financial freedom

  • WELCOME
  • START HERE
  • Make Money
  • Save Money
  • Budgeting

HOW TO PAY OFF DEBT WITH THE DEBT SNOWBALL METHOD

Last Updated on August 13, 2020 by Ngozi

How to pay off debt with the debt snowball method

Do you have debt?

Have you struggled with paying off debt?

The average American household debt is $5,700 according to ValuePenguin.  

Just thinking about your debt especially if you have lots of it, can be overwhelming.    

When it comes to paying off debt, many people don’t where or how to start. 

Why? Because some people have multiple credit cards, car loans, personal loans, student loans, etc. with different balances and interest rates.

The Debt Snowball Method is the best method to pay off debt fast by helping you prioritize your payments. The Debt Snowball Method gives small wins and keeps you motivated and on track to become debt-free.

How to pay off debt fast with the debt snowball method

How the Debt Snowball Works

Here is a summary of the debt snowball method.

Step 1: List all debts (except your mortgage) from smallest to the largest.

Step 2: List the minimum monthly payment due on each debt.

Step 3: Pay the minimum due on each debt every month. Add more money to paying off the smallest debt.

Step 4: Once you have paid off the smallest debt, add that amount to the minimum payment of the second smallest debt and continue to pay the minimum on the other debts.

Step 5: Repeat the process until all debts have been paid.

The Debt Snowball in Action

For example:

DebtBalanceMonthly Minimum Payment
Credit card$1,000$50
Credit card$2,000$100
Student Loan$10,000$150
Medical Bill$15,000$200
Car Loan$20,000$500
Totals$48,000$1000

 Once you write down your debt, you will have a clear picture of what you owe and which loan to begin paying, which in this case is the $1,000. In this scenario, you will simply begin by focusing on paying the credit card loan first. 

You do this by paying just the minimum payment on all your debts and then pay extra money on the credit card debt. 

You can pay down debt faster by creating a budget, increasing your income, working side hustles, or selling things in your home that you no longer use and put the money you make towards this smallest debt.

Once credit card #1 is paid off, you move on to the credit card #2 debt. You would repeat the process of continuing to make the minimum payments on the other debts. Since credit card #1 is paid off, you now have an extra $50 to pay towards credit #2, including the minimum payment and any other extra money you earn.

In this case, after you have paid off credit card #2, you’d move on to the student loan, using the $50 minimum payment from credit card #1 and $100 minimum payment from credit card #2 plus all the extra money you make from your side hustle. 

You’d continue the same process to pay off the medical bill and car loan until all your debts are paid off and you’re debt-free.

Focus on your smallest debt each month, pay the minimum payment, and any extra money you have towards that debt. You’ll be surprised at how quickly you pay your debt and be debt-free.

How the Debt Snowball Method Works Best

In essence, you’d pay your debts from the smallest to the largest regardless of the interest rate.  

This process requires behavior adjustments to get the debt repayment plan to work as it should. The biggest step is to stop adding more debt to what you already have. 

Why continue to add more debt if you are working towards eliminating your debt? There’s no way to get out of debt if you continue to add more debt. Condition your mind to get out of debt, using just cash only, and eliminating unnecessary spending.

If you don’t currently have a budget, start a budget and stick to it. A budget allows you to have control of your money, track your spending, focus on financial goals, save, and get out of debt. 

A budget ensures that you will always have enough money for the things that you need and the things that are important to you.

50/20/30 Budget Rule

Why this Method Works

This approach works because when you pay off the smallest debt first, you will be motivated to stick with the process until you pay off all debt and you’re debt-free.

We all like quick wins. The first time you pay off a debt, regardless of the amount, you will be so excited that you’ll be motivated to continue the debt pay off process. It will change your thinking process when it comes to spending money. 

Knowing that you no longer have that debt, gives you such a high that you’ll do what needs to be done to pay off the other debts.

What about the interest rate?

The debt snowball method is the fastest way to reduce the number of debts you have instead of the total amount you owe. You may pay more interest in the long run with this method. 

If you are concerned about the interest rate and you want to reduce the amount paid on interest, the debt snowball method may not be for you. 

However, it may be overwhelming to begin the debt pay off the journey with a large, high-interest rate debt. Many people will become frustrated and sidetracked without the quick wins of paying off small debts first.

In Closing

When it comes to paying off your debt, you need a plan. The best part about the debt snowball method is that it is easy, and anyone can do it. 

Whatever debt pay off method you decide to use will work if you are determined and focused on eliminating debt. This method has worked for so many people.

Decide you are ready to get out of debt and start.

Are you ready to get out of debt? Start today by using the debt snowball method.

Do you think the Debt Snowball Method will work for you?

Please let me know in the comments below. If you have any questions? Reach out!

How to pay off debt with the debt snowball method
How to pay off debt with the debt snowball method

7 Step guide to pay off credit card debt fast

How To Make Money Online

Taking online surveys to make extra money is a no-brainer!
You won’t get rich or make hundreds of dollars per day with surveys alone, but you can make easy money this way.

Swagbucks: ($5 free signup bonus & free gift cards, discounts, and best-paying surveys.)
Survey Junkie: Take short, easy and selected surveys and get paid up to $3 – $75 per each survey. Signup here.
InboxDollars: Get paid to watch videos, play games, and shop online. $5 Signup bonus. One already made $75 within a week. Signup now.
Vindale Research: Up to $50 per survey & $0.50 per email. $5 per referring friends, sharing payment receipts. Join now for FREE.
MyPoints: Get paid to watch videos, play games, and shop online. $10 Signup bonus Sign up now.

A tiny request: If you like this post, please share!

I know many people don’t share because they really don’t think about it.

If you learned something from the post, please share. There are people out there that this post will help.

I am building this blog piece by piece, one small share at a time, will greatly help.

A share from you would seriously help a lot with the growth of this blog.

Some great suggestions:
*Pin it
*Share to your favorite social media platform

Thank you for your support.

It will not take more than 10 seconds of your time. The share buttons are below.

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
Share
Tweet
Share
Pin
Share

Filed Under: Budgeting

About Ngozi

Hi, I’m Ngozi,  thanks for stopping by.

 

 

 

A tiny request: If you liked this post, please share this.

A share from you would seriously help a lot with the growth of this blog. The share buttons are below.

 

More info

  • DISCLOSURE/PRIVACY POLICY
  • CONTACT
  • ADVERTISE
  • HIRE ME
  • BLOG
  • ABOUT

About The Mom on a Budget

You will learn how to earn more and save more. I will provide you with tips to achieve financial freedom.

Disclaimer

The content on this site is my personal point of views and opinions.  I may receive compensation from a third party  through advertisements, affiliate links or reviews on this site or in my newsletter.  Read my disclosure.

 

 

 

Copyright © 2021 The Mom on a Budget ·