Different debt strategies work for different people, different situations, and at different times. Here’s just one example.
Getting out of debt may feel like a goal that is far out of reach, but that is why financial experts have created specific strategies that can help you make steady progress towards becoming debt-free. One of the most popular strategies is Dave Ramsey's debt snowball method. In this, you make the minimum payment on each of your debts, and then make as big of an extra payment as you can on the debt with the smallest remaining balance.
How the debt snowball method works
As you use the debt snowball method, you will, hopefully, be able to pay off your smallest debt relatively quickly. At that point, you will be able to start snowballing your payments. All the money you had been using each month to pay off that first, small debt is now available for being used as an extra payment on your next smallest remaining debt. Each time you pay off a debt, you will have a bigger chunk of your monthly income that is available for using as an extra payment on your next smallest debt.
Is the debt snowball method right for you?
- Do you have many small debts that you have a hard time tracking? The snowball method is very helpful because you will quickly pay off the smallest debts and reduce the number of accounts and payments you have to track.
- Do you need to have a quick win to keep motivated to continue paying down your debt? If your emotions have a strong effect on your behavior, you will benefit from using the debt snowball to build confidence in your ability to get out of debt.
- Do you feel overwhelmed by what you owe on your largest balances? The debt snowball plan lets you have some practice with the smaller debts first. As you make progress, you are more likely to stick with the plan and be ready to address the most significant debts when it is time to tackle them.