Debt Snowball Method 101: How to Become Debt-Free

The debt snowball method is a strategy for paying off debt by first focusing on the smallest balances. As you pay off each debt, you roll its payment into the next debt, creating momentum. It’s ideal for those who need motivation to tackle multiple debts with a clear, manageable plan.

In this guide, we’ll explain how the debt snowball works, discuss its pros and cons, and compare it to other strategies, such as debt relief services. We’ll also cover common mistakes to avoid, ensuring you have the tools to work toward becoming debt-free.

Table of Contents

1. How can the debt snowball method help you get out of debt? 
2. How does the debt snowball work? 
3. How does the debt snowball compare to the debt avalanche?
4. How to snowball debt
5. Does the debt snowball really work? 

How can the debt snowball method help you get out of debt? 

By eliminating smaller debts first, the debt snowball method builds psychological momentum, helping you stay motivated and committed to becoming debt-free.

Here’s what is unique about this method:

• Smallest balances first: Prioritizes paying off debts with the lowest balances.
• Quick wins: Provides small victories early on to boost morale.
• Motivation through momentum: Builds confidence as debts are eliminated one by one.
• Psychological focus: Prioritizes motivation over mathematical optimization.

Popularized by personal finance expert Dave Ramsey, the debt snowball method is a crucial part of his “Baby Steps” system for achieving financial freedom. Ramsey advocates for this approach because the sense of accomplishment from quick wins can be a powerful motivator for staying on track.

How does the debt snowball work? 

To adopt the debt snowball method, start by listing your debts from smallest balance to largest, ignoring interest rates. Add up the total needed for minimum payments, and decide how much extra money you can put toward repayment.

Apply the extra amount to your smallest debt while paying the minimum on the rest. Once you’ve paid off the smallest debt, roll its total payment into the next debt. This process creates a “snowball” effect as your payments grow with each debt you eliminate.

Because your total monthly payment stays the same, you’ll reduce your remaining balances faster over time. The method can help you repay individual debts faster and build confidence as you see your progress.

When we meet with clients, we also document their debt, which allows us to view their debt over longer time horizons to see its effectiveness. We share that with clients. 

When debt is going down, people are motivated. When it is not, we consider this in many other ways, including whether we recommend a home equity line of credit. Those who continue to increase their debt have other problems that could be enhanced with a bailout.

Michael Menninger, CFP®

How to calculate snowball debt reduction

Calculating the snowball method is straightforward. Start by adding up your minimum monthly payments and the extra amount you can dedicate to repayment.

Here’s an example. Suppose you have $250 extra each month to pay off the balances on three credit cards: 

Balance	Min. payment	Extra payment	Full payment
$750	$25	$250	$275
$1,500	$75	$0	$75
$4,000	$125	$0	$125
$6,250 total	$225 total	$250 total	$475 total

At the start, all extra payments go to the first credit card. The balances on the other two decrease slowly as you make minimum payments. Once you repay the first card, that $275 payment rolls into your second:

Balance	Min. payment	Extra payment	Full payment
$0	$0	$0	$0
$1,272	$75	$275	$350
$3,742	$125	$0	$125
$5,014 total	$200 total	$275 total	$475 total

When you’ve repaid the second in full, you can roll its $350 payment into the third, accelerating your payoff:

Balance	Min. payment	Extra payment	Full payment
$0	$0	$0	$0
$0	$0	$0	$0
$3,305	$125	$350	$475
$3,305 total	$125 total	$350 total	$475 total

Continuing this process ensures you pay off all debts steadily. The consistency of applying the same total payment each month creates momentum and helps you stay on track.

How does the debt snowball compare to the debt avalanche?

With both the debt snowball and debt avalanche, you’ll apply an extra payment to one loan until it’s paid off. You’ll make minimum payments on all the others. The main difference is you’ll first pay off the smallest loans with the debt snowball versus the highest-rate loans with the debt avalanche. 

• Because the debt snowball method prioritizes debts by balance, starting with the smallest, it builds psychological momentum by delivering quick wins as smaller debts are eliminated. 
• In contrast, the debt avalanche targets debts with the highest interest rates first, lowering the total interest paid.

Building on the example above, let’s say you had the following debts on three credit cards:

Balance	Interest rate	Min. payment
$750	6%	$25
$1,500	18%	$75
$4,000	12%	$125

In this scenario, the debt snowball and debt avalanche methods both allow you to pay off all your debts in about 15 months. However, the order of repayment and the total interest paid differ because of how each method prioritizes the debts:

Debt snowball

Repayment order	Time to repay	Interest paid
Credit card 1 (6% rate)	3 months	$7.17
Credit card 2 (18% rate)	7 months	$111.38
Credit card 3 (12% rate)	15 months	$400.03
Total interest paid		$518.58

Debt avalanche

Repayment order	Time to repay	Interest paid
Credit card 2 (18% rate)	5 months	$66.44
Credit card 3 (12% rate)	14 months	$354.21
Credit card 1 (6% rate)	15 months	$42.95
Total interest paid		$463.60

Although both methods take about the same time to repay your debts in this scenario, the debt avalanche saves you about $54.98 in interest because it targets the highest interest rates first, reducing the total cost of borrowing.

The debt snowball is valuable if you need the motivation of quick wins to stay on track. Ultimately, your choice depends on whether you’re more motivated by minimizing costs or psychological momentum.

I have used the debt snowball and debt avalanche methods for myself as well as recommended them to clients. 

I recommend that my clients keep track of monthly balances. If they write these down or plot them in Excel over. time, seeing the decreasing balance in a graph can be motivating.

So when I recommend debt paydown strategies, I consider both methods. While I don’t have a specific formula in mind, I will be darned if I pay off a $5,000 balance at 0% before paying off a $3,000 balance at 20%!

Michael Menninger, CFP®

How to snowball debt

The debt snowball method is about more than just numbers—it’s a way to take back control of your finances and create a plan you can stick to. By starting small and building momentum, you’ll chip away at your debts until they’re gone for good. Here’s how to do it.

What is the best way to start a debt snowball?

The first step is to organize your debts. Gather all your loan and credit card statements and write down the following information:

• Debt name: Identify the creditor or loan type (e.g., Visa credit card or car loan).
• Balance: Record the current outstanding balance.
• Interest rate: Identify the annual interest rate on the loan.
• Minimum payment: List how much you are required to pay each month.

Sort your debts from smallest to largest balance, ignoring interest rates. Next, determine how much extra money you can add to your monthly minimum payments. Even $50 or $100 each month can make a difference.

Start applying that extra money to your smallest debt, paying minimums on the rest. Once you pay off the smallest debt, roll its payment into the next debt. Repeat this process until all debts are cleared.

How to make a debt snowball spreadsheet

A spreadsheet is a simple way to track your progress. To set one up, do the following:

1. List your debts: In a spreadsheet program (e.g., Microsoft Excel or Google Sheets), create columns for your debt name, current balance, interest rate, minimum payment, and extra payment amount. List each debt in its own row, ordered by balance.
2. Record your monthly payments: Add columns for each month to record your payments, interest, and new balance. This helps you see exactly how much progress you’re making.
3. Track time to repay: Add columns to calculate how many months it will take to pay off each debt based on your payment amounts under the debt snowball versus if you just made the minimum payments.
4. Compare interest costs: Add a column to show the total interest paid for each debt. Include a comparison column for interest accrued under minimum payments alone. Seeing the difference highlights how much you’re saving with the debt snowball.

Keeping your spreadsheet updated provides a clear road map for debt repayment. Seeing your balances shrink will keep you motivated and on track to financial freedom.

Does the debt snowball really work? 

The debt snowball method can absolutely work when used correctly. Its effectiveness lies in the plan’s mechanics and how it keeps you motivated.

Focusing on small wins builds momentum, making the process feel manageable even when paying off debt seems overwhelming. While math may not always favor the snowball over other strategies, its psychological impact often makes all the difference.

Pros and cons of the debt snowball

Pros

• Momentum and motivation

  Tackling smaller debts first creates quick wins that boost confidence and keep you engaged. Seeing balances disappear reinforces your commitment.

• Simplicity

  The method is easy to follow—just sort your debts by balance and apply extra payments to one debt at a time without complex calculations.

Cons

• Interest costs

  Because the debt snowball doesn’t target higher-interest debts first, you may pay more interest over time than other strategies, such as the debt avalanche.

• Not ideal for large debts

  The method can feel slow after the initial small debts are cleared, especially if you have a large balance that takes months or years to pay off.

In my opinion, the debt snowball method has several additional pros::

• Reduces minimum payment in the event of a tight month.
• Frees up one of your credit cards for daily use. The card doesn’t have a carryover balance, so it doesn’t accrue daily interest on purchases.

Michael Menninger, CFP®

Common mistakes to avoid

The debt snowball method works best when it’s applied correctly. Here are common pitfalls to watch for:

• Ignoring your budget: If you don’t adjust your spending to free up extra money for debt repayment, progress will be slow. The debt snowball works best when you commit to putting as much extra cash as possible toward the smallest debt.
• Stopping after the first debt is repaid: The excitement of paying off one debt can sometimes lead to slacking on the rest. The key is rolling that payment into the next debt and keeping the momentum.
• Not addressing the root problem: If overspending or lack of savings caused your debt, you must address those issues to avoid falling back into old habits.

How does the debt snowball compare to debt relief services?

The debt snowball is a self-directed plan that gives you complete control of your finances. Debt relief services, by contrast, involve hiring a third party to negotiate with creditors to reduce what you owe.

For example, National Debt Relief works to negotiate settlements with your creditors for less than the total owed, but this could damage your credit. Debt relief is best for those in severe financial hardship who can’t make minimum payments.

The debt snowball method doesn’t reduce your debt but keeps your credit intact. It works well for those who can afford to make the minimum payments and an extra monthly payment. If you want control and a structured approach, the debt snowball is a powerful tool for becoming debt-free.

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