How to pay off debt using the snowball method

Now I don’t know about you. But is there anything more cliché than wanting to manage your money better in January? I jest, but in all seriousness, there is never a better time to address any financial worries than right now. January signifies a new start. It’s a new month, and most importantly a New Year. And after the excess of Christmas, it’s the perfect time to make some great New Year money resolutions. One of which might be paying off debt. And if it is, then here are my tips on how to pay off debt using the snowball method.

Now I’ve been pretty open with the debt issues I had about five years ago. And I actually followed this method in paying off my debts, before I even knew what the term snowball method was. So if you’re also looking to take control of your finances and clear your debts, then here is the snowball method.

So first up you’re going to need to make a list of all your debts. Yes, this is scary. But you can’t tackle the problem, until you know the full extent of the problem.

Once you’ve made your list, re-organise it so that you go from the smallest to the largest amount that you owe. Then work out what the minimum payments are for each. You can also at this point speak to your lenders to see if they can help by freezing interest rates. Honestly, it might seem terrifying to contact them, but your lenders will understand, and they usually want to help.

Once you have your list of the smallest to largest debt, along with what the minimum repayments are, work out how you can save money. Can you give up subscriptions you no longer need? Or can you take on additional work? Whatever extra money you can raise, put it all into paying off the smallest debt first. While also making the minimum payments on your other debts.

Once the smallest debt is repaid, then roll the money you were using, onto paying off the next debt. And then just repeat until each debt is paid. Which I know is simpler said than done. But by paying off the smallest debts first (while still making minimum payments on your other debts), you’ll start to get hpe that you can be debt free.

The snowball method works because it has more to do with psychological behaviour than it does with the maths involved. If you tried to pay off your biggest debt first. You would lose hope at the fact that it’s taking a long time. You will see the numbers slowly dropping on the amount owed. But you’ll also have the smaller debts hanging around.

But by paying off the smallest debt first, you will see progress. And quickly. Which is what will give you hope that you can overcome debt and become debt-free.

So that’s how you use the snowball method to pay off your debt. Let me know in the comments whether you’ve used this method before. And what other tips you have for clearing debt.