Managing debt is a normal part of the modern financial journey. But as interest rates surge along with historic levels of credit card debt, many households are feeling stressed by increasing monthly payments.
If you’re hoping to reduce your debt and interest fee payments, it’s worth considering the snowball approach.
How the debt snowball method works
The debt snowball method is one of the most effective debt payoff strategies. It’s designed to help you start small and gain momentum over time until you are debt-free. Here’s how it works:
- Make a list of all your debts–student loans, credit cards, vehicle loans, medical bills, etc.
- Put them in order from smallest balance to largest balance.
- Each month, make the minimum payment on each debt and then throw every available penny at the smallest debt until it is paid off.
- Repeat Step 3 until everything is paid off.
Here’s an example of the debt snowball method in action:
Using the debt snowball method, you would pay off your medical bill first. Then, when that was paid off, you’d take the money you were using towards your medical bill and apply it to your credit card bill. Then, you’d focus on your monthly auto loan payments and finally your student loans.
Studies show that small wins are the single most important factor in accomplishing a hard task. These small wins are built into the snowball method, which is why it is so effective.
Trying to pay off $98,814 in debt is daunting, but paying off $1,766 doesn’t sound so bad.
A study from the Kellogg School of Business at Northwestern University found that consumers who used the snowball method paid off their debt faster. And three large field experiments based on actual credit card data published in the Journal of Consumer Research found “focusing on paying down the account with the smallest balance tends to have the most powerful effect on people’s sense of progress – and therefore their motivation to continue paying down their debts.”
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.
Also consider the avalanche debt payoff method
While more people have success with the debt snowball method, the avalanche payoff approach is the best option mathematically.
Using this method, you pay off the debt with the highest interest rate first, regardless of how much you owe.
In the example able, you would pay off your credit card debt first, because it has the highest interest rate. You’d then direct your attention to your auto loan, student loans, and finally your student loan.
Free Debt Snowball Spreadsheets for 2024
A spreadsheet is one of the most helpful tools for planning the best debt payoff strategy for your situation. So here are some of the best free debt snowball spreadsheets for Google Sheets and Excel. Note that some of these help you evaluate the avalanche method as well.
Browse debt snowball spreadsheets:
Debt Snowball Planner for Google Sheets and Excel
Tiller’s Debt Payoff Planner for Google Sheets and Excel automatically tracks your credit card balances and loans in one dashboard, with tools for making a custom payoff strategy.
The Debt Payoff Planner makes tracking debt simple. It shows:
- Current balances on all credit cards and loans
- Interest rates for each liability based on your input
- Minimum monthly payments based on your input
- Progress toward your debt payoff goals
- Estimated monthly interest totals
- Projected debt payoff date (based on your inputs)
- Total interest paid over the lifetime of the debt
- Recommended payments to reach your desired payoff date
The Debt Payoff Planner can model the debt snowball method, avalanche, or a custom ranking payoff strategy for up to 25 accounts for up to 30 years.
See how different payoff amounts and other variables impact your debt freedom date. Experiment with variables including monthly payment amounts and time to debt payoff.
Then make a custom debt payoff plan based on your actual balances and real-world numbers.
Debt Payoff Calculator for Google Sheets
Use the Debt Payoff Calculator for Google Sheets to plan the best debt payment strategy for the fastest payoff based on your current financial situation.
Debt Snowball Spreadsheet from Reddit
This is a simple, 12-month debt-tracking spreadsheet that can help you track a snowball or avalanche strategy. It’s a good starting template for further customization.
Learn more and read comments about this template.
Debt Reduction Calculator for Excel
Not a debt snowball spreadsheet, this simple credit payment calculator template can help you calculate the amount of money you must pay each month to fully repay your debt. You can also view the monthly payment amount and the total interest paid if you make extra payments. You can use this tool to change your repayment plan and see how much longer it will take you to repay your loan.
Money and Budget Snapshot for Excel
While this simple Excel template isn’t a debt snowball calculator, it can quickly give you an idea of what you can afford to pay toward your debt after budgeting for your big living expenses. (Here’s a free Google Sheet version.)
Debt Reduction Calculator for Google Sheets and Excel from Vertex42
The Debt Reduction Calculator from Vertex42 is a spreadsheet that gets a little more intricate. The first page allows you to input your debt and select your payoff strategy: Snowball, avalanche or stair-stepper – the last of which is a unique combination of the snowball and avalanche methods.
If you choose the snowball method, there is a handy chart that will show you your projected progress. There is no such chart for the avalanche or stair-stepper method.
Whichever method you choose, there will be a separate tab where you can log your payment schedule.
For Google Sheets