The Snowball Method of Debt Repayment

Have you ever made a snowman?  Typically, snowmen are made out of two to three large balls of snow.  One or two for the body and one for the head. 

But, no matter how big the balls of snow end up, everybody starts by picking up some snow and packing it in their hands to make a baseball size snowball and then adding snow to it.  Once you have a pretty good size snowball, maybe the size of a cantaloupe or a volleyball, you start rolling that ball of snow around the yard, gathering snow and making that volleyball size snowball into a ball of snow that’s as tall as your knees! 

The Debt Snowball is kind of like that.  You start with a small amount, and then you build it bigger and bigger and BIGGER! Paying down debt faster and faster!

The Debt Snowball method was popularized a number of years ago by Dave Ramsey.  With this method or strategy, you first organize your debts from smallest to largest.  Ignore interest rates and all that, just list them out from the one with the smallest balance to the one with the biggest balance. 

Then, you put the most money you can over the minimum payment towards paying off the smallest debt.  By concentrating as much money as possible towards one debt you get a quick win. Yay!  This quick win gives your brain a dopamine hit and makes you want to do it again!  

Once you pay off the smallest debt, you take the money you were paying on that debt and you add it to the amount you’re going to pay on the next smallest debt.  

Once that second smallest debt is paid, you take the money you were paying on the first debt and the second debt and you put all of that cash towards the third smallest debt.  

And so on and so on until you have a huge “snowball” of cash you're putting towards each debt every month!  

By the time you get to the bigger debts you're paying off a big chunk of that debt each month (saving you interest), helping you pay off those bigger debts faster! 

Now, as you’re paying off the smallest debt, you pay the minimum amount on everything else so that you don’t incur any late fees.  Because late fees are Boo!  You will still rack up interest on those debts, but late fees are a huge disrupter when it comes to paying down debt, can cost you a ton of money, and decreases your credit score in the long run.  

 

The Pro and Con of The Debt Snowball Method

There are both Pros and Cons to the debt snowball method.  

The Pro of the debt snowball method, or strategy, whichever you prefer, is that it gives you quick wins.  If your smallest debts are only a few hundred or even a few thousand dollars, you can probably get those taken care of in a few months.   Then, you’ll have more dollars to throw at some of your larger debts like paying off your car.  Those initial small wins can be a great way to get and keep you motivated.  

The Con of the debt snowball method is that you’ll probably end up paying more interest on those debts in the long run.  Your smallest debts may or may not be the ones with the highest interest rates.  So, paying them off quickly does free up cash, but also allows debts with a higher interest rate to continue to accrue interest.  

 

Will the Snowball Method work For YOU?

The Debt Snowball Method of paying off debt works well for someone who:

  • has a lot of store cards with small balances  
  • has a number of school loans
  • knows they respond well to quick wins
  • just needs a plan!

 

If any of these sounds like you then the Debt Snowball might be the perfect way for you to strategize a way to get that debt paid down forever!

Ultimately, it is my firm opinion that the RIGHT method or strategy or plan to pay off debt is the one you’ll stick with!  

That’s really the key to paying down debt no matter what “method” you use.  Make a decision about what you’re going to do, and then stick with it.  Consistency is really the key in the end!

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