The debt snowball method is a debt repayment strategy where you focus on paying off your smallest debts first while making minimum payments on larger ones. As each small debt is cleared, the freed-up money is rolled into the next smallest debt, creating momentum like a snowball rolling downhill.
How It Works
- List all debts from smallest balance to largest.
- Pay as much as possible toward the smallest debt while making minimum payments on others.
- Once the smallest debt is paid off, roll that payment into the next debt.
- Continue until all debts are eliminated.
Why It Works
The method builds motivation by giving quick wins early on. Paying off small debts first provides a sense of accomplishment, which encourages people to stick with the plan until all debts are gone.
Final Thoughts
The debt snowball method is less about math and more about psychology. While it may not minimize interest costs as efficiently as other methods, it helps people stay motivated and achieve debt freedom faster.