Nearly all Americans have some form of debt. And millions of Americans feel trapped by the amount of debt that they have. If this sounds like you, you likely know first-hand how unpleasant and stressful that can be. But for so many people getting out of debt just seems so impossible. When debt starts to look like an insurmountable problem, the debt snowball method might be the strategy that empowers you to tackle your mountain of debt. 

Many people once suffocated by their debt have found financial freedom by using the debt snowball method. Its name comes from how you would build snowballs when you were a kid: you’d create a tiny snowball and roll it across the yard so that the momentum and speed would turn that tiny ball into a boulder of snow large enough to build a snowman. The backbone of the debt snowball is momentum! It ignores interest rates and instead uses your psychological state to push you forward.

The Four Steps of the Debt Snowball Method

Step One

Using an Excel spreadsheet or a simple piece of paper, list all of the debts you currently have with the exception of your mortgage. That includes all your credit cards, your student loans, your tax debt, your auto loans, and your medical debts. Put them in order of smallest to largest regardless of the size of interest rate!

Step Two

After determining which debt is the smallest, make only the minimum payments every month for each and every single one of your debts except for the smallest debt that you owe. That is the debt that you are going to attack head on first!

Step Three

Pay as much money as you can on that smallest debt each and every month. If you find you have extra money at the end of the month, then throw some more money at that particular debt. Cut down on your unnecessary expenses to increase the amount of money you can put towards that smallest debt. Keep doing this until the first debt is paid off completely!

Step Four

After you’ve defeated that first debt, roll those payments on over to the next smallest debt and start throwing all your extra money at that one. Having one less minimum payment will enable you to pay an extra fifty bucks or more per month. Additionally, the feeling of accomplishment will likely fuel your motivation so you might be able to reallocate even more funds to your debt snowball! Repeat this process until each debt is paid in full, going up and up in size.The key of the debt snowball method is behavior modification and the driving force behind it is hope. Yes, you can make it out of debt because you paid off the first debt then the second debt and so on and so forth until it’s all gone. This does not mean it is an easy process and this does not mean there won’t be lifestyle changes and sacrifice necessary. But once you have made your way out of the debt, you will be able to breathe easier and have a level of financial freedom that you never deemed possible.

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