Got debt?

I know, it’s not as fun or catchy as “Got milk”.

But if you’re here, chances are you have debt, and probably a lot of it.

I freaking hate debt. It’s stupid. It’s suffocating, and stops so many people from reaching their dreams.

In 2013, my wife and I found ourselves buried under $100,000 of combined debt, and we were just starting our teaching careers. To put in perspective, we made less than $40,000 combined income. 

It was a recipe for disaster, and we had no real way to pay off our debt anytime soon.

So I started searching for an answer. 

I dove into the world of budgets, Dave Ramsey, and crazy debt payoff stories.

I still remember reading about a woman who paid off $80,000 of debt in 4 years, and it blew my mind! Stories like that stick with you. And for the longest time, all I did was read debt free stories, but never did anything about it. 

But the truth is, I wanted a story like that. I wanted to be debt free as soon as possible. I wanted to start a family and hold a snuggly little baby.

Plus I wanted to be able to afford daycare. 

When we first got married, our student loan payments were $922 a month. That’s more than daycare in our city.

I knew we couldn’t afford daycare and student loans, so the student loans had to go.

Within a year of getting married, Jenna and I made a plan to pay off our $100,000 of debt in 5 years. We set a crazy goal, made a plan, and got to work. 

I was ready to start our crazy debt free story, for real. And 5 years later, we were officially debt free.

And I want you to have a story like that too.

One of our big “secrets” to paying off our debt is the debt snowball method, made famous by Dave Ramsey.

I’m going to tell you all about the debt snowball method and why it works to pay off massive amounts of debt, faster than anything else I know.

Are you ready to start your debt free story?

What is the Debt Snowball Method?

Did you watch cartoons as a kid? 

Or do your kids watch cartoons now?

If so, you probably know the scene I’m going to describe.

I can’t remember a specific cartoon, but it starts with kids skiing on a hill. Eventually one kiddo falls down and wipes out.

But the kid doesn’t just fall into the snow, he starts rolling down the hill. And as he rolls, the snowball gobbles him up and rolls down the hill, growing more massive by the second.

It bowls over everything in its wake until it reaches flat ground.

That’s how the debt snowball method works.

Except with debt. 

Your debts starts to roll away, faster and faster as your snowball grows. Eventually your snowball (and your debt) are on flat ground and you’re ready for your debt free scream.

This is Not a Guide to Create a Debt Snowball Spreadsheet

A debt snowball spreadsheet is the perfect tool to harness the power of the debt snowball method to become debt free. 

In this article, I’m only going to explain WHY the debt snowball method works. Not HOW to make one.

If you’re looking for a “how to guide”, check out this article. Debt Snowball Spreadsheet: How to Make One Today.

You can download a free template to help you get started.

How Does the Debt Snowball Method Work?

One word. Momentum.

When your debt snowball spreadsheet is all set up, your debts will be lined up from lowest amount to highest amount.

For each debt, you pay the minimum payment required. That rule applies for every debt except for your smallest debt. 

Here you want to pay as much extra as you can each month toward your smallest debt until it’s paid off.

This is where the magic happens. 

Once your first debt is paid off, you apply your minimum balance from it, and anything extra you can spare to your next smallest debt until it’s paid off too.

After that, repeat the process. 

Add the amount from your two paid off debts to your next smallest debt, and keep going until you’re debt free.

The beautiful thing about the debt snowball method is the momentum.

When you pay off a debt, it accelerates how quickly you’ll pay off your next debt. The more debts you pay off, the faster your debt repayment will go.

Just like the snowball in the cartoon. The longer it rolls, the faster and bigger it gets.

Let’s look at an example with real numbers.

Here’s your debt break down.

Loan NumberLoan AmountMinimum Payment
11,000$50
22,300$110
35,700$125
410,400$175

You start by paying the minimum on every loan.

The exception is Loan 1, which you pay the minimum balance plus anything extra you can. Let’s say you can afford to pay $100 extra a month.

So you pay $150 on it every month instead of just $50 until it’s paid off.

After a few months of hard work and discipline, Loan 1 is gone! Hell freaking yeah!

Now you take the $150 you were paying on Loan 1 and apply it to Loan 2.

Instead of $110, you’re paying $260. 

The cool thing is, you already know you can afford to pay extra because you’ve been doing it for months.

A few more months go by, and you pay off Loan 2! Time to celebrate! Grab a cheap bottle of wine and enjoy the accomplishment of being one step closer to debt free.

When your next payment is due for Loan 3, your minimum payment is going to be pretty huge. Tack on the $260 you were paying on Loan 2, and you’ve more than tripled your original payment to $385.

Loan 3 is a little bigger, but it will fall just like the rest after a few months.

Once it does, it’s time to attack Loan 4 with everything you’ve got.

Your debt snowball method built your “minimum” payment to $460. 

It’s not a huge amount, but it will make Loan 4 disappear faster than paying $175 a month, that’s for sure.

And now you’re debt free!

That’s the basic principle of the debt snowball method. And from experience, it works.

And if you get any big wind falls or pick up extra small jobs, you can add lump sum payments to your debts to make the process go faster. 

We used tax returns, started coaching after school sports, led after school clubs, and worked at a restaurant. We were so motivated that we were willing to do anything to add extra loan payments.

Every dollar helps the debt snowball method

But Wouldn’t I Save More Money Paying Off the Loan with the Highest Interest Rate First?

The complicated answer is…maybe.

Math says yes, you’ll save money if you pay off the highest interest rate loan first because you’ll pay less interest over the lifetime of the loan.

But everyone’s situation is different, and the math doesn’t always work out in your favor to target the highest interest rate first. I know it didn’t for us. I did the math.

When you target your highest interest debt first, and throw everything you have at it, it’s called a Debt Avalanche. 

It works exactly the same as the debt snowball method, except for you pay off your debts in order of interest rate, from highest to lowest. But the set up is exactly the same. 

You can use my free template to set it up your debt snowball spreadsheet, just pay your debts off in order of interest rate.

Debt Snowball Method vs. Debt Avalanche

You could also read this as “pay off the smallest loan first vs. pay off the highest interest rate loan first”.

The good news is, no matter which method you use, they both work and you’ll be debt free.

In my opinion, it honestly depends on what your loans look like. And a little bit of your personality (more on that in the next section).

We used the debt snowball method because after running every scenario, it was the fastest way to become debt free.

Our highest interest rate loan had a balance of $33,000. It would’ve taken us FOREVER to pay it off and roll our minimum payment into the next loan.

Instead, we used the debt snowball method and paid off our smallest loan of $1,300. 

It took us 3 months.

I think we had an extra paycheck month or a coaching stipend come through and we threw it all at this loan.

We got excited and attacked the next loan with everything we had. 5 years later we were debt free.

Why the Debt Snowball Method Works

There are a few reasons the debt snowball method works. If you put in the work to set it up and then commit to using it, you’ll be debt free faster than making minimum payments. 

I didn’t want to be paying off my student loan debt when I was in my 40s and 50s, and I’m sure you don’t want to be either. And if you’re in your 40s and 50s and still have student loan debt (or any debt), it’s time to make a real plan to get rid of it. 

1. Momentum

If you stick with it, your debt will fall like dominoes

I said it before, and I’ll say it again. It’s all about momentum.

When we paid off our first loan, we got so freaking excited! 

We danced around our kitchen like little kids, then went out to buy a cheap bottle of champaign. 

It was time to celebrate! One debt was gone forever.

I’m a firm believer in celebrating small victories along the way, and even though it was only one $1,300 loan, it felt like we won the Super Bowl.

Paying off this one small debt created excitement and most importantly, we started to BELIEVE we could become debt free. 

That brings me to the second reason the debt snowball method works. Psychology.

2. Quick Wins Show Results and Builds Confidence that You Can Do It

I love learning about how our brains work. 

Paying off debt is a mental game just as much as a logical one, if not more. Debt wears on you constantly. It delays your dreams and leaves you feeling helpless. 

But when you start paying off debts, you feel motivated to work harder, to be creative with your budget, and that keeps you on track instead of feeling hopeless.

Our success paved the way for more success.

We knew the process worked, and we poured even more effort into it.

Once our first loan was paid off, our next smallest loan was $6,000.

Want to take a guess how long it took us to pay off?

4 months.

It honestly should’ve taken us over a year to pay off, even with the debt snowball method. 

But we were EXCITED! We took every opportunity to save money, work extra jobs and coaching sports at our school, and poured every dollar into our debt. 

With the debt snowball method, we paid $185 at minimum ($100 added to $85), but we used our tax return and paychecks from 2nd and 3rd jobs to pay it off even faster. 

Momentum and psychology were on our side and we knew nothing could stop us from our goal of paying off $100,000 of debt in 5 years.

We already saw results after only a few months. When you see results, you’re more likely to stick with it. Just like a diet or workout program.

Momentum and psychology are the two reasons why I LOVE the debt snowball method and recommend it to anyone struggling to pay off debt.

If we stuck with the traditional approach of making the minimum payments, it would’ve taken us 25 years. I like 5 years a whole lot better. 

3. The Debt Snowball Focuses on Behavior, Not Math: Logic And Math Aren’t The Only Factors In Paying Off Debt

I already mentioned this, but it’s important to say again.

Paying off debt and budgeting aren’t all about math and logic. If it was, we’d all be debt free and living on a budget.

But our brains don’t always listen to logic.

We’re emotional people and our emotions drive a lot of our behavior, especially behavior related to money.

Take a minute and answer this question.

What emotions do you feel when you think about money?

What comes to mind? How does money make you feel?

The last time I heard this question asked to someone, they said, “when I think about money I feel stressed and anxious”.

If that’s how you feel about money, is it even possible to make logical decisions? I would argue no. Anytime you’re feeling highly emotional, it’s nearly impossible to make a rational and logical decision. 

Trust me, I work with middle schoolers on a daily basis. Middle schoolers are some of the most emotional people on the planet. With mood swings and hormones running wild, it’s so hard to have logical, rational conversations, especially when they start to feel frustrated, upset, or highly anxious.

When emotions flare up, our conversations are never productive, and neither are their actions.

And honestly, when it comes to emotions and logic, we’re no different than middle schoolers.

So, if you’re feeling anxious and stressed out about money, logic won’t help you stick to a budget or pay off debt. 

You need quick wins, momentum, and excitement. And that’s why the debt snowball method works. It changes your behavior.

4. All of Your Debts are in One Place

Organization is a huge factor in paying off your debt. 

If you have a hard time remembering how much you owe, when your payments are due, or which websites to log into, creating momentum and positive energy will be hard.

With a debt snowball spreadsheet, everything you need is in one place:

And as a bonus, the debt snowball spreadsheet tracks your target payoff date for every loan and your debt freedom date.

Are You Ready to Try the Debt Snowball Method and Start Your Debt Free Journey?

If you are, awesome. I have a free tool for you.

I made a debt snowball spreadsheet with complete instructions for set up. It’s the same spreadsheet we use to pay off $100,000 of debt in 5 years (with our budget of course).

Grab your free debt snowball template today. 

Why the Debt Snowball Method Works

2 Responses

  1. This is a great overview of both methods. We use a combination of the two by weighting the interest rate by the principal outstanding. So we’re still prioritizing the higher interest rates but also taking into account the size of the debt. I do believe that seeing a debt completely go away, even at a small interest rate is very satisfying! Another tactic we have use, but you really need a lot of discipline, is taking advantage of 0% interest credit card offers to get 12-18 months of low interest — I say low interest b/c there are typically upfront fees of 2-5% so you’re effectively paying that as interest. But it doesn’t compound and you can knock off a lot of the loan amount during that 12-18 months. We have only done this for our rental mortgage debt — we only recommend taking on debt for assets that generate money, not for consumption!

    1. That’s a smart approach. I’m a firm believer that there’s no “one size fits all” but in finding the solution that makes the most sense for your situation. Solid advice

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