Learn how to use Dave Ramsey’s debt snowball method to get out of debt! A great way to keep up the motivation when paying off your credit cards, student loans, and other debts. Love the example that explains exactly how a debt snowball works!
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How To Use The Debt Snowball Method To Pay Off Debt

Dave Ramsey’s debt snowball method can help you pay off your credit cards and student loans. The debt snowball method is explained step-by-step so you can learn exactly how to setup and use a debt snowball to get out of debt!

Learn how to use Dave Ramsey’s debt snowball method to get out of debt! A great way to keep up the motivation when paying off your credit cards, student loans, and other debts. Love the example that explains exactly how a debt snowball works!

What is the debt snowball method?

The debt snowball method was made well known by Dave Ramsey. It is a way to pay off debt that starts gradually and builds momentum as you begin paying off your debts.

The debt snowball method explained

In the debt snowball method, you pay off your debts from smallest to largest. As each debt is paid off, you take the amount you were paying to the first debt and start applying it to the second debt.

When you pay off the second debt, the amount you were paying to debts one and two now gets applied to debt three. As you begin to payoff your debts, your snowball continues to grow.

How to use the debt snowball method to get out of debt

1. Determine the balance owing and minimum payments of each debt you’d like to pay off.

2. Place your debts in order from smallest to largest balance.

3. Decide how much you can allocate to debt payments each month.

4. Pay only the minimum payments for all debts except the smallest balance debt.

5. The difference between your allocated amount and the minimum payments in step 4 gets allocated to the smallest debt.

6. Once the smallest debt is paid off, repeat the process. Your total amount paid to debt each month should not change.

An example of using the debt snowball method

Suzy Smith would like to pay off her two credit cards, student loan, and hospital bill.

Step 1: Determine the balance owing and minimum payments:

ABC Credit Card: Balance-$1,500; Minimum payment-$30
123 Credit Card: Balance-$5,000; Minimum payment-$100
Anytown Hospital: Balance-$300; Minimum payment-$20
Student Loan: Balance $3,000; Minimum payment-$50

Step 2: Put the debts in order from smallest to largest balance

Debt 1: Anytown Hospital $300
Debt 2: ABC Credit Card $1,500
Debt 3: Student Loan $3,000
Debt 4: 123 Credit Card $5,000

Step 3: Decide how much you can allocate to debt payments each month.

Suzy has decided she can afford to pay a total of $400 towards her debts each month (this includes the required minimum payments)

Step 4. Pay only the minimum payments for all debts except the smallest balance debt.

Suzy pays the minimum balance due on debts 2-4.

Debt 2: ABC Credit Card $30
Debt 3: Student Loan $50
Debt 4: 123 Credit Card $100

Step 5. The difference between your allocated amount and the minimum payments in step 4 gets allocated to the smallest debt.

Suzy can pay $400 a month to her debts, and the minimums for debts 2-4 total $180. She stills has $220 to pay towards debt 1 (Anytown Hospital).

Step 6. Once the smallest debt is paid off, repeat the process. Your total amount paid to debt each month should not change.

In the first month, Suzy pays the minimum balance due on debts 2-4. Suzy can pay $400 a month to her debts, and the minimums for debts 2-4 total $180. She stills has $220 to pay towards debt 1 (Anytown Hospital).

Debt 1: Anytown Hospital $220
Debt 2: ABC Credit Card $30
Debt 3: Student Loan $50
Debt 4: 123 Credit Card $100
Total paid: $400

In the second month Suzy only has $80 remaining on her Anytown Hospital bill. So of the $220, $80 goes towards debt 1, and the remaining $140 gets paid to debt 2 (ABC Credit Card).

Month 2’s payments look like this:

Debt 1: Anytown Hospital $80 (NOW PAID OFF)
Debt 2: ABC Credit Card $30 + $140 = $170 total
Debt 3: Student Loan $50
Debt 4: 123 Credit Card $100
Total paid: $400

Notice that she still paid $400 for the month, even though the allocation between the debts changed from the first month.

Advantages of using a debt snowball

By focusing your debt payoff to a single debt at a time, you’ll see progress faster than if you had split the extra money among all of your debts.

Quicker progress on getting out of debt will keep you motivated and eager to be successful in paying off debt!

RELATED: 7 WAYS TO GET OUT OF DEBT FAST

Disadvantages of using a debt snowball

The debt snowball method relies on motivation by paying off smallest debts first. The problem is that this doesn’t take interest rates into account.

When you focus solely on debt size, you could end up paying more in interest over time.

Who is the debt snowball method best for?

  • A debt snowball will work best when you have several different size debts. If your debts are similar in size, you may lose motivation with progress being slower.
  • You will be motivated by quick wins.
  • You have extra money in the budget to apply to debt payments.

Debt payoff tracking printables

It's easy to pay off debt quickly with Dave Ramsey's debt snowball method. Track your monthly payments with this free printable debt snowball worksheet.
Want printables to track your progress on your debt payoff? Check out my debt snowball tracking printable.

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