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If you have decided, like thousands of other people, that you want to get out of debt, you may be interested in learning about the debt snowball system. Such method can help you pay off fast if you are willing to make a commitment. This system works best if you have a total debt of around $25K  or less, if it is much higher consider zip debt.

This method is called so because the amount that you begin paying eventually snowballs into a much larger amount until you are able to pay off all of your existing financial obligations.

In order to snowball debt, you would implement the following steps:

  • Organize all your bills from the smallest amount to the largest amount on a piece of paper or in a spreadsheet on your computer.
  • Resolve to pay the minimum monthly payments due on every account, except your smallest one.. That means if you have balances ranging from $250.00-$25,000.00, then you need to focus on paying off the $250.00 balance first.
  • Pay the minimum monthly due on the smallest one you possess and also pay everything else you can possibly pay towards . If it’s twenty extra dollars, so be it. If it is one hundred extra dollars, even better. If you can afford to pay off the whole $250.00 in one payment, that’s awesome.
  • Once you get rid of the smallest debt, move on to the next smallest one and pay the minimum monthly due plus the amount your previously paid to the first account, until it is paid off.
  • Once that one is paid off, move on to the next one in line, until all your obligations are successfully paid off. This creates a snowball effect which applies from one to the next, hence the name snowball debt elimination.
  • Remember to continue paying the minimum monthly payment due on all accounts.

    • If you have enough discipline and motivation you can tackle this on your own, but if you need motivation and structure, you might want to check out the See Beyond 20/20 program.  The company owns a software that comes up with a monthly report that shows you what accounts you should prioritize to effectively get rid of debt faster.

    While some people may think that the payments should be prioritized according to how much interest is owed on each account, others think that is not as important as actually making progress to pay them off. The debt snowball system is psychologically effective. By paying off the smallest balances first, you will feel as if you are making more progress, than if you begin slowly chipping away at the largest balance you have.