See How the Debt Snowball Method Can Work for You

"Focus on your smallest debts first" is how the debt snowball method works. It's effective for many people, but is it the right debt payoff strategy for you?

In the past several decades, consumer debt has skyrocketed. The majority of Americans are in debt. A staggering 73% of Americans take it to their grave. Even our government is in debt.

It’s easy to think this is normal and consequently, to turn a blind eye to your own financial woes. But debt sucks. It’s a drain on your time, your energy, and your money.

It forces you to work too many hours and stress too much. It keeps you stuck in a perpetual loop of chasing minimum payments. And it leaves you vulnerable to the inevitable emergency.

Eliminating debt frees you to spend your money the way you see fit. It opens up the possibility of saving and investing so you can be financially prepared in an unpredictable world. It adds choice and freedom back into your life.

After all, you are the one earning your money, so it should be yours to keep.

The Debt Snowball Method

Unfortunately, there’s no quick fix for debt. It won’t just go away, so you have to give it an honest look and come up with a plan to eliminate it.

One of the most effective plans to eliminate debt is the debt snowball method. As the name suggests, it is designed to help you start small and gain momentum over time until you are debt free. Here’s how it works:

  1. Make a list of all your debts–student loans, credit cards, vehicle loans, medical bills, etc.
  2. Put them in order from smallest balance to largest balance.
  3. Each month, make the minimum payment on each debt and then throw every available penny at the smallest debt until it is paid off.
  4. Repeat Step 3 until everything is paid off.

Here’s an example of the debt snowball method in action:

Let’s assume you have $2,000 available to put toward debt each month.


If these numbers look familiar, it’s because they represent the average debt of the typical American household. $98,814 is a sobering number; I imagine the typical family wants to get that number to $0 as quickly as possible, but it can be really difficult to stay the course day in and day out for however many months or years it will take to achieve debt freedom.

So how do you stay motivated when there are a million other demands on your money? By using the progress principle.

The “progress principle” states that small wins are the single most important factor in boosting motivation while attempting to accomplish a hard task. These small wins are built into the snowball method, which is why it is such an effective tool.

Trying to pay off $98,814 in debt is daunting, but paying off $1,766 doesn’t sound so bad. By the time you’re ready to attack your largest debt, it will feel achievable. And before you know it, debt freedom will be yours.

FREE Debt Snowball Spreadsheet Templates

Here’s a roundup of the 7 best free debt snowball spreadsheets

Here’s our Debt Snowball Spreadsheet Template for Google Docs

  • Here’s our Debt Snowball Spreadsheet Template for Google Docs

Debt Snowball vs Debt Avalanche

Let’s say your debts looked like this:

DebtAmount OwedInterest Rate
Auto Loan$1,5903.24%
Credit Card$2,72527.99%
Student Loan$10,8294.30%

Using the debt snowball method, you would pay off your auto loan first. Then, when that was paid off, you’d take the money you were using towards the monthly auto loan payments and apply them to your credit card balance.

Then, when you paid off the credit card, you’d apply the money you were using for those payments toward your student loans.

This is the most effective payoff method from a psychological standpoint; studies show you’re more likely to follow through because of those first few quick wins.

But mathematically, the best way to pay off your debt is using the avalanche method. Using this method, you pay off the debt with the highest interest rate first, regardless of how much you owe.

In this instance, it would mean paying off your credit card debt first, as it has the highest interest rate. You’d then direct your attention to your student loans, and finally your auto loan.

Ansley Fender

Ansley Fender

Business financial consultant, personal finance coach, tax preparer, mother, spreadsheet nerd.

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