The Debt Snowball Method – How it Can Melt Away Your Debt


It has been a cold February but while there’s no snow forecast for this Half Term it’s time to start making some snowballs with the Debt Snowball Method. This method created by Dave Ramsey is probably the easiest way to get out of the red and into the black. While down here we never seem to get enough snow to actually have a proper snowball fight, this method is based on the same principle of making the perfect projectiles for battle. Just like when you rolling a snowball in the garden you start with a little and would roll it along until it became bigger and bigger. So much quicker than if you just built it up by hand.

It is with that exact thinking that the debt snowball method works:

Step 1: List all your debts by smallest to largest by amounts owed. Ignore the interest rates for now, don’t worry whether it’s got a 3% rate or a 32% rate.

Step 2: Pay minimum payments on all of your debts except the smallest one. Attack that smallest debt with a vengeance, take all the money that you’re saving from not paying big payments on you other debts and use them to obliterate your smallest one.

Step 3: Once that debt is gone, take the money you were putting toward that debt, plus any money you find, and attack the next debt on the list.

Step 4: Once it’s gone, take that combined payment and go to the next debt. Knock them out one by one until there’s none left!

Step 5: Congratulations you’re debt free!

The point of this method is behaviour modification. If you’re constantly trying to pay off all your debts, or get rid of your largest debt first you’ll loose heart pretty quickly. You’ll only see a little bit of change and it feels like you’re not achieving anything.

This way, by ditching the smallest debt first you see real progress. It’s now gone, forever! soon the second debt will go, and the next, and the next so because you see the plan is working, you’ll stick to it!  By sticking to it eventually, you’ll be debt free!

By the time you’re making bigger payments on the bigger debts, you’ll have so much more cash freed up from not having to pay off the other debts that you’ve created a “debt snowball“. You’re putting hundreds a month into it rather than whatever you have left over. You build momentum, change your behaviour to get out of debt and stay that way.

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