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[Updated July 2021]
I was sitting at my computer looking at my dwindling bank account. Every month my balance dropped a little closer to zero, increasing my nerves and anxiety.
I pulled up my student loan websites one by one to add up all of my minimum payments. I felt hopeless when I added up how much money I needed to pay back. It was over $45,000.
I needed a miracle. Or at least a plan.
I went to my good friend Google for answers and found the tools to climb out of this giant hole I dug for myself.
When my wife and I started dating, we had mountains of debt. I carried around my giant weight of student loans, but that’s not the whole story. Both of us had credit card debt, car payments, and Jenna also had $45,000 of student loans. We were a match made in heaven, except we were miserably overwhelmed by debt.
Our total debt was $100,000 – and we were making less than $45,000 a year combined.
We felt suffocated and stifled and afraid that debt would steal our dreams of getting married and starting a family. Kids and daycare are expensive, and we didn’t want to bring a child into the world to be crushed by debt from day one.
We also couldn’t afford daycare and student loans.
Our budget would easily be $500 in the red every month. I wanted those suckers paid off as soon as possible!
After a few hours searching on Google I found the weapons to slay our debt dragons.
First, we each created a zero based budget to manage where our money was going, but we needed another plan – a plan to pay off our debt. Luckily, we stumbled upon a little miracle worker called the debt snowball.
My goal in this article is to teach you how to make a debt snowball spreadsheet. I don’t care if your debt snowball is in Google Sheets or Excel. I want to help you get out of debt, and I know a debt snowball spreadsheet is the best tool to do that.
What is a Debt Snowball Spreadsheet?
Dave Ramsey is famous for spreading the concept of the debt snowball spreadsheet. That’s where we first heard about it, and when we first started working to become debt free, we consumed everything on Dave Ramsey’s blog.
Imagine a silly cartoon of kids playing on top of a hill. The kids are goofing around, throwing snowballs at each other and building a snowman. Then one of them slips and falls down the hill. In true cartoon style, instead of just falling down and getting back up, the kid starts rolling down the hill.
At first he rolls slowly as snow forms up around him. But soon he picks up speed and turns into a rolling snowball. Before long, he’s a giant mass of snow rolling out of control down a hill, getting bigger and gaining speed every second. Nothing can stop him and he basically destroys everything in his path.
That’s how a debt snowball works.
Except instead of a kid rolling crazy fast down a hill, your debt gets paid off faster and faster as your debt snowball rolls.
The basic principle is to pay off your smallest debt as fast as possible. (Notice I said smallest debt, not the one with the highest interest rate. I’ll explain why in a little bit.) Once it’s paid off, instead of spending the payment money someplace else in your budget, you apply it to the next lowest debt.
For example, if you pay off a student loan with a minimum balance of $50 and your next smallest loan payment is $100 you combine those payments together.
Now instead of your minimum payment being $100, you pay $150 which helps you pay off your debt faster. Then once that loan is paid off, you take the $150 and apply it to the next smallest loan. You repeat the process until you’re debt free.
How Does the Debt Snowball Work? Let’s See it in Action
Back in 2014 when we built our debt snowball spreadsheet, we had 5 student loans between the two of us. What’s mine is yours and what’s yours is mine, right? We weren’t excited to take on each other’s student loans when we got married, but we were committed to paying them off fast.
We used our debt snowball with student loans, and it WORKED!
Let me show you.
Our smallest loan had a balance of $1,384.92 and had a minimum payment of $100. I actually think it was a smaller payment, but we paid extra to pay it off faster. Once it was paid off, we applied the $100 to our next smallest loan making the new “minimum payment” $185.77.
When we finally got to our last student loan, we were paying $922 a month instead of our minimum payment of $220. And during the process, if we had any extra money or small windfalls, we applied the money to our student loans. So some months we paid $1,500-2,000 to make the process go faster.
If we had stuck with the minimum payments it would’ve taken us 25 years to pay off our student loans.
Read that again 👆🏻
Instead, we used a debt snowball to get out of debt in less than four years on two teacher salaries.
To say the debt snowball is awesome is an understatement. It gave us 21 years of debt free-living and let us start our family way sooner!
Why the Debt Snowball Works to Pay Off Debt
If you’re big on math, you might be wondering why I don’t recommend paying off the highest interest debt first. Mathematically paying the loan with the highest interest rate will save you money in the long run because you’ll pay less interest.
But paying off debt is more emotional and mental. It’s not all logic.
If debt was about math and logic, nobody would be in debt. Money is emotional.
I will nearly always recommend paying off the smallest loan versus the loan with the highest interest rate. When you’re staring at a mountain of debt, it feels good to get a quick win. It helps build your confidence and get more excited about getting out of debt.
I mean, when we looked at our debt snowball spreadsheet for the first time, we had nearly $100K of total debt. It was so discouraging to think of how long it would take to pay it off.
But we had a plan and set to work.
We created momentum and belief when that first loan was paid in full.
Without that success and belief, we may not have had the same attitude towards our debt. We used the momentum and paid off $73,000 of debt in less than four years (on two teacher salaries). The rest qualified for student loan forgiveness.
Also, if we trusted logic and math and paid the highest interest rate loan first, it would’ve taken us 10+ years to pay it off. Instead we paid off ALL of our loans in less than 4.
It would have been tough to maintain the mental energy and enthusiasm, not to mention, our debt snowball would have taken longer to get rolling.
How to Set Up Your Debt Snowball Spreadsheet to Get Out of Debt Fast!
It’s time to make your very own debt snowball spreadsheet!
Are you ready!?
It’s by far the best tool I know of for tracking and paying off your debt way ahead of schedule. Below are the steps I followed to create ours, with a few screenshots to help you out.
If you want to skip all of the steps, I created a debt snowball spreadsheet that’s ready to go with minimal set up. All you need to do is input your numbers and enter a couple formulas. It’s a free debt snowball spreadsheet download. You can grab it here.
You can also buy the Debt Free Playbook for $17, which has step by step walk through videos and strategies to get the most out of your debt snowball spreadsheet, whether you set it up in google sheets or excel.
That’s a steal 👆🏻
But if you’re a start from scratch, DIY kind of person, let’s keep going.
Step 1: Look up your individual debts and interest rates
The first step is to look up each of your debts so you know the total amount and the interest rate for each one. Find all of your logins and passwords and pull everything up on your computer.
Once you have this information written down or pulled up on different tabs on your computer, you’re ready to start building your debt snowball spreadsheet.
Step 2: Getting it all into your debt snowball spreadsheet!
You can set up your debt snowball spreadsheet in Excel or Google Sheets. Both systems will get you the same results, it’s all a matter of preference. I love Google Sheets and will be demonstrating with that. But like I said, you can make a debt snowball for Excel too.
Download your free debt snowball spreadsheet here to get the template. I really want to make your debt snowball set up as simple as possible.
First, across the top of your debt snowball spreadsheet, enter the name of each loan and the interest rate. You’ll need the interest rate later, so keep it close and in sight. When you do this, leave a column in between each debt to enter the minimum payment for each loan. It should look something like this.
(Note: I do have more loans than are listed in this chart, but it didn’t fit on the page very well so I left a couple out in the screenshots).
Next, enter the total amount owed for each debt in the cell directly below the name of the loan.
Also, under the payment column for each, enter the minimum monthly payment in row three.
In the bottom right corner of the cell there will be a small blue box. To duplicate the minimum payment for each cell in this column, click that blue box and drag down.
It will put the same minimum payment amount in each cell. Drag down as far as you think you need to.
In order to have your numbers reflect dollars, you will probably need to change the formatting of the cells to currency. To do this, highlight each cell with a number in it, the dollar sign in the toolbar.
If yours looks like this, you’re on track.
Once you have all of your debts lined up, the reality of how much debt you have might feel overwhelming. I know it did for me. I knew roughly how much debt I had, but to see it all laid out plainly so I could add it up quickly, felt really daunting.
But it’s part of the process.
If you’re making a debt snowball spreadsheet right now, then you’re better off than most people in debt because YOU’RE DOING SOMETHING ABOUT IT!
I’m proud of you for choosing a debt free future and putting in the work now to experience freedom in a few years.
Step 3: Add Dates in Column A
Tracking your progress is huge for your debt snowball spreadsheet. It also helps you plan how fast you can be debt free.
Starting with whatever month it is, enter the name of the month and the year in cell A3. For example, if you are starting today, enter December 18. Below that, January 19, February 19, etc.
It’s a safe bet to keep going for about 5 years worth of months. This is tedious and time consuming. I found it annoying because the formatting kept changing. Tinker with it until you find a format you like.
And if you want to make MULTIPLE payments each month, create two rows for each month with the amount you plan to make for each payment. Making multiple payments each month is a great idea because you’ll save money on interest and it will help you pay off your debt faster.
Step 4: Calculate how much you actually pay off with each payment.
Up to this point we haven’t needed any formulas to help us make calculations. But it’s time to get fancy! If you’ve never used formulas in a spreadsheet, it’s pretty much the coolest thing ever.
The only formula you need calculates the approximate interest you’ll pay with each payment. The formula for this is pretty simple.
(Total Amount Owed X Interest Rate) / 12 = Monthly Interest You Pay
Take the total amount owed for the loan and multiply it by the interest rate. Once you have done that, divide by twelve to get the monthly interest.
Let’s calculate my Firstmark loan together. The total amount owed is $1,384.92 as listed in cell C2. If I multiply that by the interest rate of 3.3% (multiply by .033) it equals 45.70 after rounding. Then to get the monthly interest, I divide that by 12 to get an average monthly interest payment of $3.81 (again after rounding).
(1,384.92 X .033) / 12 = 3.81
This is approximately how much of my payment is going toward interest every month. Now you’re ready to create your formula!
Click in cell C3 and enter the following formula.
=(C2-B3)+monthly interest rate
For my Firstmark loan, I enter “=(C2-B3)+3.81.” If you’ve done this correctly, it will automatically calculate the new remaining balance on your loan.
The beauty of this is that if you need to change your monthly payment, or have extra money that month, all you do is type the amount of money you’re putting toward the loan in the “minimum payment” box, and it will automatically update your repayment for the rest of your cells.
It’s amazing and makes it so easy to adjust and update your debt free date.
See How Long It’ll Take to Pay Your Smallest Debt in Full
Now, to duplicate this formula throughout the rest of the C column, click on the cell C3.
The bottom right hand corner will have a small blue box, just like I explained above.
If you click and drag that box down the column, it copies the formula into each box that you highlight, automatically updating the progress of conquering your debt.
Drag this box down until the remaining balance becomes zero or negative.
Now look over at the date in Column A. If you make the minimum payment every month, that’s the month you can expect to pay off that loan. If you want to pay it off faster, find ways to increase your minimum payment.
Use the same drag down method on the payment columns to duplicate the minimum payment each month.
Repeat the process for each of your loans and debts using the appropriate cell numbers. When finished, it will look something like this.
Step 5: Calculate the Debt Snowball in Action
The best part about creating a debt snowball spreadsheet in Excel or Google Sheets is it allows you to easily use the concept of the debt snowball vs writing down your debts on paper.
The magic begins when you pay off one of your debts.
As you can see in the example above, by maintaining a minimum monthly payment of $100 a month, the Firstmark loan on the left is paid off officially in October 2017.
This is assuming that I only pay the minimum balance each month.
Side note: I highly, highly, highly recommend paying more than the minimum balance if you can.
Now that one loan is paid off, I simply apply the $100 I was paying on that loan to the loan with the next lowest remaining balance, the Campus Partners loan making my new payment $185.77.
The extra $100 helped me pay off this loan so much faster. It’s also easy to update my formula to see my new pay off date. If I click on the cell for November 17 of my Campus Partners loan, the formula will show up in the formula bar indicating “=(E17-F18)+25.32.”
The only change I need to make is to change the 85.77 to 185.77 in the “payment” column, and then drag down the payment column with my new minimum payment until the loan is paid off.
It should automatically recalculate your payoff date and if you’re like me, you’ll be amazed at how much sooner you can pay it off using the debt snowball spreadsheet.
Extra Payments Make Your Debt Disappear Fast
As I played around with this I was amazed at the difference this extra $100 dollars made on the time table needed to pay off the loan.
If I only paid the minimum balance of $85.77, it would take nearly seven years to pay it off completely.
However, by adding the extra $100, I could pay it off in only a little over two years!!!
Read that again 👆🏻 It’s powerful.
That is five years of payments I don’t have to make! HOLY COW!!!
Every time you pay off a loan, add the amount you were paying towards your next lowest debt and the debt snowball works to pay off your debt faster and faster! Now repeat the process for the rest of your debts.
Jenna and I went from 30 years of paying off loans to five after creating our debt snowball spreadsheet and using the debt snowball method.
That is a difference of 25 years!!!
A small disclaimer, we did make other choices in our lifestyle – living on a budget and working extra jobs – to help us pay more than the minimum balance on our lowest loan, but this concept has truly transformed our ability to pay off debt incredibly fast!
You can play around with your debt snowball spreadsheet to see which order will get you debt free the fastest. For us, it was the smallest balance loan and leaving the highest interest rate loan for last. Find the order that is the fastest for you.
Debt Snowball vs Debt Avalanche
There’s a lot of debate over which debt free strategy works better – the debt snowball or debt avalanche.
Here’s what you need to know about the differences and which will work better for you.
When is the Debt Snowball Best for Paying Off Debt
This is my recommendation for most situations because you pay off the smallest debt first, which creates momentum and belief in your system.
Feeling successful in the first few months of paying off debt helps you keep going, and that’s important.
The debt snowball method works best when all of your interest rates are fairly similar. We used our debt snowball for student loans, which all had interest rates between 3-7%.
After crunching the numbers and setting up a debt snowball spreadsheet to pay off our debts in different orders, I found it fastest to start with the smallest debt first.
When to use the Debt Avalanche to Pay Off Debt
The debt avalanche uses math and advocates to pay off the debt with the highest interest rate first.
The goal is to save money on interest over the course of getting out of debt. The debt avalanche works best when you have one or two high interest debts, like credit card debt. By attacking the debt with the highest interest rate, you’ll pay it off faster and save hundreds, if not thousands on interest.
Which is better for you? Debt Snowball or Debt Avalanche?
Only you can answer that question, but you can use the debt snowball spreadsheet I describe in this article to help you out. This is also a part of the Debt Free Playbook mentioned below. Here’s how to figure out which method is better for you.
When you set up your debt snowball spreadsheet, set it up as a debt avalanche AND as a debt snowball.
Include all of your loans in each spreadsheet and see which one gets you out of debt faster. Then use that debt spreadsheet and don’t look back.
Honestly, the debt snowball and debt avalanche both work. The most important thing is to set your spreadsheet up as soon as possible.
Try the Debt Free Playbook
If you made it this far, you probably have everything you need to get out of debt fast with your debt snowball spreadsheet (or debt avalanche).
But, one thing I’ve noticed about a lot of debt free tools and guides is that it’s missing an actual GUIDE to show you how to become debt free.
That’s where the Debt Free Playbook comes in handy.
I don’t want you to have to get out of debt by yourself, and I certainly don’t want you to feel super frustrated working with your debt snowball spreadsheet. If you’re feeling frustrated, alone, and just weighed down by your debt, the Debt Free Playbook is probably for you.
You’ll get a guided video of me creating a debt snowball spreadsheet with you. You can watch as I enter formulas, minimum payments, and format the spreadsheet to find your debt free date.
PLUS….there are bonus videos, because bonuses are fun.
The bonus videos help you with things like:
- An extra Debt Snowball Spreadsheet Template (just in case you lost yours or don’t want to try and find it)
- Set up Guide – Set up your Debt Snowball Spreadsheet in 20 Minutes
- Debt Payoff Acceleration Tutorial – See what happens when you pay $20 extra per month
- How to calculate making extra payments
- Help you find the best order to pay off your debt so you’re debt free the fastest
The goal is to help you get out of debt as fast as possible, and the Debt Free Playbook can help you do that. It’s the closest thing I have right now to live coaching. Go check out more details – just click here.
What to do Next?
If you’re ready to make a debt snowball spreadsheet, get your free download here. Or buy the Debt Free Playbook for $17. Both of these will make it easier to set up your debt snowball in Excel or Google Sheets.
Still on the fence about the debt snowball method? Check out this article on “Why the Debt Snowball Method Works“.