Are you wondering if the Debt Snowball Method could help you become debt free? Quick answer: YES! Here’s a complete guide on how to use the Debt Snowball Method to pay off debt.
…or if you want to snag the free printables, here ya go (there’s another opportunity at the end of this post):
I’m just going to get this out of the way – I’m borderline obsessed with Dave Ramsey.
But for good reason. He changed my life.
I was struggling with six figures of student loan debt. My debt was more than twice my annual starting salary. I felt like there was no way I could get myself out of this mess. I figured I would be 40 years old and still paying off my college education.
But then came Dave Ramsey and I learned about the Debt Snowball Method. This method helped me pay off all my loans. I’m now debt-free and it feels amazing. I’ve never looked back.
Who can benefit from the Debt Snowball Method?
I truly believe that EVERYONE can become debt-free using the Debt Snowball Method.
It doesn’t matter if you owe $1,000 or $100,000 or more. This method will change your life too.
Related: Things I Wish I’d Known Before Starting the Debt Snowball Method
Step 0: Buy The Total Money Makeover book by Dave Ramsey
Is Step 0 a thing? While this step is not technically part of the Debt Snowball Method, I think you should still do it: Buy Dave Ramsey’s book, The Total Money Makeover.
If you need something to get you pumped to pay off your debt, this book is a must-read. When I first got the book, I flipped through the pages only reading the personal stories that are scattered throughout the book.
Each and every story made me feel so happy for these strangers who were in bad financial circumstances, but turned their lives around. After reading each story, I felt “if they can do it, so can I“. Trust me, that feeling is worth the price of the book – go buy it.
Step 1: List all your debts and prioritize them from smallest to largest balance
First, you have to list every single debt that you have. This includes the $50 you borrowed from your friend for the concert ticket and the $50,000 student loan. Make sure you list all your debts except for your mortgage.
I recommend getting a copy of your credit report to make sure you don’t have any hidden or forgotten debts (<– ahem, I’m coming from experience here…I got surprised by a $4,000 student loan that I didn’t realize I took out my freshman year of college).
When you have your list of debts, arrange them from smallest balance to largest balance.
Ignore the interest rates of your loans – those don’t come in to play in the Debt Snowball Method. Does this disturb any of you math nerds? As an engineer, I was very uncomfortable with this too. Don’t let that stop you.
The power of the debt snowball is that sense of accomplishment you get when you pay off your first debt. It’s that ability to snowball your minimum payment from the debt you just paid off to your next debt. It’s that building of momentum and excitement that other debt payoff methods will never give you.
Here is an example of Step 1:
- Debt Priority 1: Credit card debt (balance: $3,537)
- Debt Priority 2: Student loan #1 (balance: $9,058)
- Debt Priority 3: Car loan (balance: $19,102)
- Debt Priority 4: Student loan #2 (balance: $23,433)
Side note: I have the perfect worksheet to help you with this step. Keep reading and at the end of the post you’ll find out how to get it for free!
Step 2: Minimum payments + extra on your smallest debt
During Step 2, you start paying off your debts. You need to pay the minimum payments on all your debts. However, for the smallest debt, put all your extra money towards paying down the principal balance.
Don’t have extra money? Find ways to save on your every day items, pick up a second job or start a side-hustle…do anything you can to pay off the smallest debt as quickly as possible. Before you know it, your smallest debt will be paid off!
During Step 2, this is what the example looks like:
- Debt Priority 1: Credit card debt (balance: $3,537, minimum payment $45/month) – pay minimum payment + any extra money you have
- Debt Priority 2: Student loan #1 (balance: $9,058, minimum payment $106/month) – pay minimum payment
- Debt Priority 3: Car loan (balance: $19,102, minimum payment $350/month) – pay minimum payment
- Debt Priority 4: Student loan #2 (balance: $23,433, minimum payment 246/month) – pay minimum payment
Step 3: Start paying off your second smallest debt
Once your smallest debt is paid off, start paying off your second smallest debt.
Since you no longer have to pay anything towards your smallest debt (it’s gone!), you can add its minimum payment to the second smallest debt. You’ll also want to put any extra money towards the second smallest debt.
During Step 3, this is what the example looks like:
- Debt Priority 1: Credit card debt (balance: $3,537, minimum payment $45/month) – pay nothing…this debt is gone!!
- Debt Priority 2: Student loan #1 (balance: $9,058, minimum payment $106/month) – pay minimum payment + minimum payment from Debt 1 ($45/month) + any extra money you have
- Debt Priority 3: Car loan (balance: $19,102, minimum payment $350/month) – pay minimum payment
- Debt Priority 4: Student loan #2 (balance: $23,433, minimum payment 246/month) – pay minimum payment
Step 4: Continue the Debt Snowball until you are debt-free!
Once your first two debts are gone, start attacking your third smallest debt.
Each time you pay off a debt, you add its minimum payment to the next debt. That’s how the Debt Snowball gets its name. The minimum payments roll over and get larger just like a snowball rolls and gets larger as it picks up snow.
During Step 4, this is what the example looks like:
- Debt Priority 1: Credit card debt (balance: $3,537, minimum payment $45/month) – pay nothing…this debt is gone!!
- Debt Priority 2: Student loan #1 (balance: $9,058, minimum payment $106/month) – pay nothing…this debt is gone!!
- Debt Priority 3: Car loan (balance: $19,102, minimum payment $350/month) – pay minimum payment + minimum payment from Debt 1 ($45/month) + minimum payment from Debt 2 ($106/month) + any extra money you have
- Debt Priority 4: Student loan #2 (balance: $23,433, minimum payment 246/month) – pay minimum payment
Continue rolling over the minimum payments until all your debts are paid off!
The Power of the Debt Snowball
Any to-do list fanatics out there? I love a good to-do list. I make one every day and sometimes will include super easy tasks on there just so I can get the satisfaction of crossing something off the list (should “take a shower” really be on anyones to do list?? hehe).
I crave that sense of accomplishment and progress as you check off each task. It builds confidence in me that I can tackle the day, and I feel motivated to go on to the next task.
Well, that’s exactly what the Snowball Method does for you. The first debt you tackle is your smallest debt and the easiest to tackle. Once you pay off your first debt, you get this incredible sense of accomplishment. The debt is gone forever and you now have one less thing you have to worry about. You feel like you are making progress. You feel ready, excited, motivated to tackle the next debt. You wouldn’t get that feeling if you were using a different method (like the Debt Avalanche Method). And to me, that is the power of the Debt Snowball.
After you pay off each debt, you get to roll the minimum payments onto the next debt. Those minimum payments add up and it feels so good to pay more and more of your debt off.
Related: 10 Mistakes I Made While Paying off Debt
Free Debt Snowball Printables!
I’ve already said this, but being debt-free feels AMAZING. I want everyone to feel this way. So I created three Debt Snowball printables to help you get there faster. If you sign up below, you’ll receive three printables over the course of three days. Here’s a look at what you’ll get.
- Debt Priority printable – this helps you organize ALL your debts and prioritize them from smallest to largest balance (making step 1 easy peasy)
- Debt Snowball Tracker printable – this is the perfect way to visualize your debt payoff progress! (<– And you can print as many as you want. Only 2 debts? – print 2. 16 debts? – print 16!)
- Debt Snowball Payments printable – stay organized all year long by recording your debt payments (there is space to list your minimum payment, snowball payment, and remaining balance each month….for each debt!)
Did you sign up for the printables? Are you just starting out with your Debt Snowball or have you already made some progress? I’d love to hear from you!
Creditmarvel.com says
Debt sucks and it can creep up on you fast. we recently purchased a home and budgeting is in full force. It’s sometimes hard to say no to certain purchases or things but we try to keep in the end goal in mind. Great share!
Liv says
Oh yes, debt sucks. It definitely creeped up (and scared) my newly-graduated 22-year old self (although..uh…I should have seen it coming since I signed up for it at 18). Good luck with your new house and glad to hear that you are budgeting away 🙂
Charmayne says
I need help to get my family out of the hole we have dug ourselves into. Everyone has told me to use this system. I’m a visual person and daily list maker but my lists to get out of debt haven’t been cutting it. Thank you so much! I can’t wait to get these printouts and start using this system. Ordering the book now!!!
Liv says
I’m so excited for you, fellow list maker! Good luck on your debt-free journey…and I can’t wait to hear how the Debt Snowball Method works for you!
M says
How do you sign up for the worksheets
Liv says
Hello! You can sign up for the worksheets in the box right above these comments. It’s a box with a dark blue border, pictures of the worksheets, and a place to enter your email address and name. Click the orange button that says “send it my way!” and your first worksheet should arrive in your inbox in seconds. I hope you enjoy!
Mariam says
I want to start doing something with my debt
Liv says
I think the Debt Snowball Method is a great place to start! Good luck!
Brandy says
We are trying to save up to move in the next year or so. I am hoping this system can help me budget and deal with our debt and we can finally see a light at the end of the tunnel. Thank you so much for offering the free printables. Greatly appreciated.
Liv says
You’re welcome! Good luck!
Katie says
These are great printables! We are starting our debt snowball, and I totally see these being a huge help and to keep us motivated. Great idea! I love Dave Ramsey!!
Liv says
Katie, I’m so glad you like the printables 🙂 Good luck on your debt-free journey!
Lynn says
I’m starting today (9-25-17)….we are about $70k in debt excluding mrtgs. I have used this method before and this works. Today is the day. I forgot about Dave Ramsey’s snowball effect. No to trips 4-5wks a yr for now…. 🙁
Liv says
“Today is the day”…starting is one of the hardest parts of the debt-free journey, so I’m glad you’ve got that out of the way 🙂 Good luck!
TM says
Hi
Am starting out
I hope to bring a report soon of my first liberation.
Liv says
hahah, that sounds good! Let us know when you are debt-free!
Douglas Antrim says
I agree with you when you said EVERYONE COULD BE DEBT FREE. The debt snow-ball method requires you to pay off the debt with the smallest balance first. By paying debt this way you free up money faster than some other methods. I love this system.
Liv says
The snowball method does free up money faster than other methods. Definitely a selling point!
One of the main reasons I started this blog was because I truly believe everyone can achieve debt-freedom…and I want to help them on their journey! I love that you agree 🙂
Becky says
Excited to be debt free
Liv says
That’s great – I’m excited for you too! Good luck on your debt-free journey 🙂
Rachel says
Here goes nothing!
Liv says
Rachel, you’ve got this!
Kacey says
I pray this works as I am a single mom with credit card debt, massive student loan debt (how can they charge so much interest on these?), some medical, and I just bought my first house which needs some serious attention. But I have faith
Liv says
You can do this Kacey! It WILL work! And, I’m right there with you – I had super high interest rates on my student loans too :/
Laura says
I’ve used this method over the years- wish I could say I stuck with it. One of my points of discouragement has been additional medical debt. It is unavoidable 😞 due to chronic medical conditions.
Any suggestions? Should I reprioritze debts each time a new debt comes along?
Thank you for your enthusiasm! It is encouraging.
Liv says
Hi Laura! If I were in your shoes, I would probably increase my emergency fund so that I would not have to go into debt each time I had a medical expense. I would try to avoid going into more debt as much as possible and a larger safety net (your emergency fund) will help with that. Also, don’t give up on your debt snowball! Everybody’s debt journey has ebbs and flows…mine was certainly a roller coaster. Be persistent (even if you aren’t 100% perfect with your budget or debt payments), and you’ll eventually get to that awesome debt-free destination!
Jenny says
I have a question it says to put extra money towards paying down the principal balance. Does that get sent off with the minimum payment or is that something I would need to call to tell them? I’m new at this. God bless.
Liv says
I have worked with several different loan companies and each have different ways that they accept principal loan payments. I would definitely call each company and find out how they want you to send in your principal only payments. Sometimes you have to send in a separate check with an “apply to principal only” in the note section. Sometimes it’s as easy as a checking a box during the online payment process.
I’m so excited that you are taking these first steps to putting extra money towards your debt! Exciting!
Amy says
This system appeals to me, I love list making and ticking stuff off! I’m actually excited to start paying off debt rather than just constantly making minimum payment on everything and feeling stuck, you’ve explained it really well too as I’ve heard about it before but it didn’t really click in my brain, thankyou!!
Liv says
You’re welcome! I’m so glad you’re getting excited to pay off debt…it’s so worth it! Good luck 🙂
Renee says
We are well on our way! We have paid off 2 credit cards using the Debt Snowball method and have 2 more payments left on a third!! This method really works!! Still have a few credit cards to go, but we are loving the feeling of accomplishment.
Liv says
That is amazing! Thanks so much for sharing. I bet your comment will encourage others to start their debt snowball today!
Jaz Soto says
I’ve been wanting to pay off our debt for some time now. Let’s give it a try. I’m ready for our family to be DEBT FREE!!
Do I include debt that’s in collections also??
Liv says
Jaz, I’m so excited you are taking the first steps to get your family out of debt 🙂 Yes, include debt that is in collections and once you have a payment plan or settlement figure with the collections agency you can incorporate that into your family’s debt payment plan.
Michelle I Reynolds says
I have been working on this using your printables this past year. I am down to my last major credit card this year and see the end in sight. I have been laser focused so I can become debt free for the final time. It took being debt free and getting back into credit card debt a 2nd time to make it really stick.
Liv says
This makes me SO HAPPY! Thank you for sharing! I bet it feels great to be near the finish line, and I’m so glad that my printables were able to help you. 🙂
Emilia says
I’m looking forward to using your worksheets to help me organize my debts and start paying off my credit cards. I really like and look forward to using the Debt Snowball Tracker, I really like how its broken down into small amounts. I strongly believe this will keep me motivated when I see the progress I’m making even in small amounts. I get overwhelmed when I look at my whole debt so breaking it down will help me a lot. Thank You so much for sharing these great resources!
Liv says
You’re welcome! I’m so happy you are planning to use the worksheets 🙂 I created these worksheets to get rid of (or at least minimize) the overwhelm and stress caused by debt. It makes me so happy when I learn that people are using them and benefiting from them!
Emmy says
I’m nervous/excited about starting this process! But know that I need to start now. I’m a single mom with about $25,000 worth of debt. Debt and minimum payments have become a part of my life! I think of all the extra money I’d have every time I make a payment on credit cards. It’s sickening! Thank you for your posts-it gave me the boost I needed!
Liv says
Emmy, I’m so happy you are going to start the debt-free process/journey! I can 100% relate to the feeling of being nervous/excited, and can relate even more to thinking about all the extra money if debt payments didn’t exist (I would always daydream about what I would do with my debt payment money if it didn’t have to go to my debt). Once your debt is paid off, you’ll get to live the dream and it’s going to be so much fun deciding what you are going to do with all your extra money 🙂
Kathy says
I am very excited to try things! Thank you for the motivation and the printables! My husband and I are grandparents to 12 grandchildren of which 2 of them live with us and we support them. Right now my husband is on disability and I work a minimal job. I do have ways to earn extra on the side and plan on doing as much as possible to get our $50,000.00 of debt paid down! Thanks for the info!