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The Debt Snowball Method To Pay Off Debt Fast

Feb 17, 2020Debt0 comments

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Becoming debt-free is no easy task.

Between high-interest rates and an inability to afford more than the minimum payment, paying off debt can feel like an impossible task.

But, fear not!  I have good news:

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When you use a debt payoff strategy, like the Debt Snowball Method, becoming debt-free will become your reality.

Today, we’ll go over:

  • what the debt snowball method is,
  • the pros and cons of using this method,
  • how to set up your own debt snowball,

and more.

Now, let’s dive in so you can become a debt-free badass ASAP.

WHAT IS THE DEBT SNOWBALL METHOD?

The Debt Snowball Method is a strategy for paying off debt that has you prioritize your debt payoff in order from lowest amount owed to highest.

In other words:

When you use the snowball method, you will make minimum payments on all your debts EXCEPT for the one with the lowest total amount owed.

For your debt with the lowest total amount due, you’ll pay your minimum balance PLUS all EXTRA income until this debt is paid off in full.

Next, repeat this process for all of your debts until you are debt-free.

THE PROS & CONS

One of the reasons why paying off debt is so difficult is because most of us can’t afford more than our minimum payments.

Because of this, even if you continue to pay your minimums on all of your debts, month after month, your total debt won’t decrease by hardly anything.

But, when you use the debt snowball method, you will be able to knock out your lowest debts first, which frees up tons of money for paying off your larger debts.

This is the biggest pro to using the debt snowball method: You won’t feel like you’re in a never-ending cycle of debt payoff.

Now, you might be wondering:

“This sounds great and all, but if I can’t afford more than my monthly minimums, where is this extra cash coming from to put towards my lowest debt?”

Well, in order to free up money for extra debt payments, you’re going to have to do three things:

  1. Reevaluate your current budget
  2. Cut unnecessary expenses
  3. Track your spending

Don’t worry:  I’m not gonna leave you hanging.

Let’s take the time to go over each of these steps, now.

1.)  Reevaluate Your Current Budget

Do you have a budget that you stick to each month?

Maybe yes, maybe no?

Either way, take the time to reevaluate your current budgeting method by:

1.  Writing down your monthly income sources and your monthly expenses

2.  Next, subtract your total monthly expenses from your total monthly income to see if you’re living within or beyond your means.

If the number you calculated is positive, then you are living within your means and have extra money each month – extra money to put directly towards paying off debt.

If the number you calculated is negative, then you are living beyond your means and are spending more than you earn each month.  

Therefore, you will have to minimize unnecessary spending and decrease your monthly expenses to free up money for your debt.

Keep reading to learn how to decrease your monthly expenses by up to $1,000!

Read Next…

Need help starting a budget?

Click to learn about the 5 best budgeting methods and decide which one is best for your lifestyle!

2.)  Cut Unnecessary Expenses

When you take the time to actually write down everything you pay for each month, it becomes very obvious which bills you’re overspending on and which bills you can get rid of altogether.

So, first things first, write down all of your expenses (and mark which ones are fixed expenses and which are variable expenses).

(Monthly Expense Organizer found in our Budget Boss Binder)

Next, take your variable expenses and get rid of all non-necessary items, such as cable and take out money.  Then create a budget for the rest of your variable expenses such as $100/week for food and $20/week for gas.

Finally, let’s look at your fixed expenses – things like rent, car insurance, and cell phone bills.

Go down your list and make a plan to decrease each item (if you can).

For example, you should:

These are just a few examples of how you can easily decrease your monthly expenses by hundreds of dollars — hundreds of dollars you can now put towards debt!

Read Next…

Who knew saving hundreds of dollars could be so simple?

Furthermore, who knew you were missing tons of opportunities to save money on things you already buy?

Click to learn 101 ways to save money!

2.)  Track Your Spending

Do you know how much money you spend each month on coffee?  Trips to Target?  Random late-night shopping sprees?

It’s cool.  Neither did I.

It wasn’t until I started tracking my spending in a budget planner that I realized this:

It is insane how much money I was spending without even realizing it.

And, you probably are, too.

It’s a simple fix though:

Start tracking your spending in a budget planner and then stop your bad spending habits.

This budget-saving tip freed up $250/month for me to put towards debt!

HOW TO SET UP YOUR DEBT SNOWBALL

Awesome!

Now that you’ve freed up tons of money to put towards your debt, you can finally set up your debt snowball.

It’s super simple, just follow these steps:

  1. List your debts in order from the lowest total due to the largest total due
  2. Make your minimum payments on all debt + put all extra money towards the debt with the lowest total balance until it is paid off
  3. Put your first debts minimum payment towards your next lowest debt + all extra money until it is paid off
  4. Repeat this process until all debt is paid off

Let’s see each step in action….

STEP 1:  List your debts in order from lowest total balance to highest

Before diving into your journey to becoming debt-free, it is crucial that you know exactly how much debt you have.

So, make a list of every debt you have, including your minimum monthly payment and your total balance due.

Then, number this list in order from your lowest total balance to your highest total balance.

(Make sure you’re not forgetting any debts by using a copy of your credit report from Credit Karma!)

For example:

  • Debt 1 – Credit Card #1: $70 minimum payment + $3,000 total balance
  • Debt 2 – Credit Card #2: $145 minimum payment + $5,000 total balance
  • Debt 3 – Car Loan: $390 minimum payment + $8,500 total balance
  • Debt 4 – Studen Loan: $100 minimum payment + $11,000 total balance

**To help you with this step, I’ve created a super simple worksheet that you can download as part of your Budget Boss Binder.

*Debt worksheets included in our Budget Boss Binder

STEP 2:  Make minimum payments on all debts + put all extra money towards debt #1

This is when you’ll start paying off your debt by making minimum payments on all your debts EXCEPT your number one priority debt.

On your debt with the lowest overall balance, make your minimum payment + put all your extra money towards additional payments.

I know, I know.  Extra money.  Ha!

The reality is that most of us don’t have extra money lying around (or we probably wouldn’t be in debt).

So, don’t forget these tips:

1.  Refinance your mortgage for a lower interest rate & start paying biweekly

2.  Sign up for Trim to cut your cable, phone, and WiFi bills in half

3.  Switch to Mint Mobile to save hundreds on your cell phone bill

4.  Refinance your car loan for a lower interest rate

5.  Shop around for lower car insurance

6.  Invest in energy-efficient options to reduce utility costs

7.  Consolidate your credit card debt into a personal loan to decrease your interest costs and create one low monthly payment

8. Refinance your student loans for a lower interest rate

9.  Switch to Chime Bank (it’s SO simple!) to get rid of all banking fees (and get a FREE $50 gift right now)

10.  Make & stick to a budget

And, lastly, you can always make more money to put towards your debt by asking for a raise, working overtime, getting a second job, starting a blog or side hustle, selling your stuff, renting out a spare bedroom in your home, and more.

Here is what step #2 should look like:

  • Debt 1 – Credit Card #1: $70 minimum payment + $3,000 total balance  MAKE $70 MINIMUM PAYMENT + ALL EXTRA MONEY YOU HAVE
  • Debt 2 – Credit Card #2: $145 minimum payment + $5,000 total balance – MAKE $145 MINIMUM PAYMENT
  • Debt 3 – Car Loan: $390 minimum payment + $8,500 total balance  MAKE $390 MINIMUM PAYMENT
  • Debt 4 – Studen Loan: $100 minimum payment + $11,000 total balance  MAKE $100 MINIMUM PAYMENT

You will continue step #2 each month until debt 1 is paid off in full.

STEP 3:  Put debt 1’s minimum payment + extra money to debt 2

Once your first debt is paid off (yay!), you can put its minimum payment + all extra money towards your next debt.

This means that your second debt shouldn’t take as long to pay off because you’ve significantly increased the amount of money you have to put towards payments.

For example:

  • Debt 1 – Credit Card #1: $70 minimum payment + $3,000 total balance – MAKE $70 MINIMUM PAYMENT + ALL EXTRA MONEY YOU HAVEPAID OFF
  • Debt 2 – Credit Card #2: $145 minimum payment + $5,000 total balance – MAKE $145 MINIMUM PAYMENT + $70 MINIMUM PAYMENT (FROM DEBT 1) + ALL EXTRA MONEY
  • Debt 3 – Car Loan: $390 minimum payment + $8,500 total balance – MAKE $390 MINIMUM PAYMENT
  • Debt 4 – Studen Loan: $100 minimum payment + $11,000 total balance – MAKE $100 MINIMUM PAYMENT

Once debt 2 is paid off, put debt’s 1 and 2’s minimum payments towards debt 3, and so on.

STEP 4:  Repeat this process until you are debt free!

Once you’ve gotten the hang of the debt snowball and have paid off your first two debts, you’ll simply continue the same process until you are debt-free.

By the time you’re working to pay off your 3rd, 4th, 5th, debt you’ll have so much money to put towards payments that clearing your debt will become a breeze.

Woo-hoo!

HOW TO MAKE SURE YOU  STICK TO YOUR DEBT PAYOFF PLAN

Now, sticking to your debt payoff plan is easier said than done.

So, how do you make sure you follow through each month on your debt snowball?

I’ve got two ways to motivate you to continue paying off your debt:

  1. Create a reward system
  2. Track your progress

Firstly, after you pay off each debt (or half of each debt), reward yourself!  Go out on a celebratory date, buy a new outfit, pop some champagne, etc.

After paying off large sums of debt, you should acknowledge and feel goooooood about such a big accomplishment.

Secondly, and most importantly, you should track your debt repayment progress each month to make sure you’re sticking to the plan.

To track your debt repayment progress, I highly recommend using our Budget Boss Binder.

When you use our Budget Boss Binder to track your debt repayment progress, you will be able to map out your budget each month to make sure you’re putting as much money as possible towards paying off debt.  You’ll also be able to track your debt payments using a monthly tracker.

And, I’m excited to tell you:

Because we love our readers so much (where would we be without you!?), we’re offering our Budget Boss Binder for only $9 (66% off) RIGHT NOW.

Just click the link below!

SPECIAL OFFER!

SAVE $18 RIGHT NOW

When you act fast, you can download our best-selling Budget Boss Binder for only $9!  But, quick!  This deal ends tonight at midnight!

Alright!  There you have it!

A complete guide to the debt snowball method for paying off debt!

Will you be using this strategy to become debt-free?  Or do you have a better way?  Leave a comment below!

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DESTROY YOUR DEBT!
– michelle
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