snowball your debts

How to Snowball Your Debts!

By: K. H. Smith

If you are like most Americans, you have debt.  Maybe you have a lot of debt, maybe you don’t. But either way, you would be better off without it. If you look at your monthly expenses, wouldn’t it be so much smaller without credit card payments, car loans, student loans, or even your mortgage? Think how much cash you would free up! It’s pretty exciting! Well, let’s talk through some way to make that happen with either debt avalanche or snowball your debts…

First, you need to know what you owe and to whom.  Make a list of your debts, remaining balances, minimum monthly payment, and interest rate.

Debt Balance Interest Rate Minimum Payment
Car Loan $6000 4% $350
Student Loan $1000 6.5% $200
Credit Card #1 $2000 9.5% $100
Credit Card #2 $2000 9.0% $100


Next, figure out your monthly budget if you haven’t already done so.  You need to know how much extra money you are working with. In order for this plan to work, you need to pay the minimums to all but one debt.  So start by figuring out what the minimums are and plug those numbers in.  How much is left?  That is the amount you have to work with.

But first, make sure you have a $1000 or more emergency fund.  If not, read this post. You need the emergency fund so you don’t use credit cards if something unexpected arises.  But this is for EMERGENCIES only!

Now, you figure out your plan. Generally speaking, you are better off paying your highest interest rate debt first. This reduces how much interest you are paying in the long run. Once you choose the debt to be paid off first, send as much money as your budget allows to that one debt.  You pay the minimum payment to every other debt.   Once that debt is paid off, you then take the amount you were paying and roll it into the next debt.  You continue to pay debts off with more and more funds as other debts are paid in full.

Here is an example with a $500 extra payment amount:


Debts Credit Card #1 Credit Card #2 Student Loan Car Payment Total Paid
January $600 $100 $200 $350 $1250
February $600 $100 $200 $350 $1250
March $600 $100 $200 $350 $1250
April —————-> $700 $200 $350 $1250
May $700 $200 $350 $1250
June —————–> $900 $350 $1250
July —————–> $1250 $1250
August $1250 $1250
Sept Debt Free!

Don’t get too hung up on which debts to pay off and in what order.  In the end, it is really up to you.  I prioritized my debts by interest rate, which also worked out to be “bad” debt first.   So for me, it was credit card debt first, then car payment, then student loans. This method of paying highest interest rate first is the debt avalanche method. This method maximizes the interest saved, which can increase how much principle you can pay each month. Getting you out of debt faster!

Working on your debts from smallest to largest, called the snowball method (by Dave Ramsey) and this method works too.  It may not save you the most money, but if you have a small debt you just want to knock out…That’s fine! Do it. Paying off one debt may motivate you further to keep on the debt free journey!

It is so satisfying to pay off each debt.  The bigger debts feel amazing as they get paid! Trust me, it feels great to pay them off!



If you have questions on snowballing or avalanching your debt, feel free to leave me a comment!

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