The Snowball Method: Your Practical Guide to Getting Your Debt Sorted

(If you're new here, you might want to check out our article on "6 Simple Ways to Break Free From Debt").
Ever sat on the beach watching a wave roll in? It begins as a gentle ripple, but as it gets closer to shore, it picks up size and momentum until it becomes something powerful. That's exactly how the Snowball Method of debt reduction works, and it's a tried and true method to crush debt one small victory at a time.

What Actually Is the Snowball Method?

It's beautifully simple: you pay minimum repayments on all your debts, then throw any extra money at your smallest debt until it's gone. Once that's cleared, you take all the money you were paying towards it (including the minimum payment) and add it to the minimum payment of your next smallest debt. Rinse and repeat until you're debt-free.

Let's Make This Real

Meet Sarah (not her real name, but her numbers are real). She's looking at her debts and feeling overwhelmed. Right now her debts look like this:

• Interest Free Store Card: $2,200 (0% for 6 months)

• Credit Card 2: $4,700 (19.5% interest)

• Credit Card 1: $5,500 (12% interest)

• Car Loan: $16,400 (12.5% interest)

With a monthly income of $4,555 after tax each month, she's ready to tackle these debts head-on.

Here's How Sarah's Snowball Rolls

Even though her store card is interest-free for now, Sarah decides to tackle it first because it's her smallest debt. Smart move – here's why:

1. She makes minimum payments on everything each month:

• Store Card: $110 (5% minimum)

• Credit Card 2: $235 (5% minimum)

• Credit Card 1: $275 (5% minimum)

• Car Loan: $550 (fixed payment)

2. After essential living expenses, she can put an extra $400 towards debt. Following the Snowball Method, all of this goes to the Store Card:

• Store Card payment = $110 (minimum) + $400 = $510 total

3. At this rate, she'll pay off the Store Card in about 4-5 months, well before the 0% interest period ends. Now here's where the magic happens.

4. Once the Store Card is gone, Sarah takes that $510 she was paying and adds it to the minimum payment on her next smallest debt (Credit Card 2):

• Credit Card 2 payment = $235 (minimum) + $510 = $745 total

Watch the Momentum Build

With each debt Sarah clears, her debt-crushing power grows:

• After Credit Card 2: She'll have $745 to add to Credit Card 1's minimum

• After Credit Card 1: A whopping power payment towards her car loan

Why This Works So Well

Remember our article on 'soft saving'? The Snowball Method follows the same principle – it's about making your money moves sustainable and celebrating small wins. Each time Sarah clears a debt, she:

• Has one less payment to juggle each month

• Sees her progress in real time

• Builds confidence in her money management skills

• Stays motivated to keep going

The Power of Small Wins

The Snowball Method isn't just about mathematics – it's about momentum. Yes, Sarah could save a bit more in interest by tackling her 19.5% credit card first (known as the Avalanche Method, but that's another article!). But the psychological boost of clearing that first debt often provides more value than the interest saved and that’s what makes it sustainable.

Whether you're dealing with $2,000 or $200,000 in debt, remember this: every journey starts with a single step, or in this case, a small snowball. Roll with it, celebrate your wins, and watch that momentum grow.

Ready to start your own debt-free journey?