How the Debt Snowball Method Works

Are you drowning in debt? The debt snowball method offers a simple way out. Instead of complex math, it relies on quick wins to keep you motivated.

Here's how it works.

What is the Debt Snowball Method?

The debt snowball method tackles debt by paying off your smallest balances first, regardless of interest rates. You'll make minimum payments on all debts except the smallest one, which gets every extra dollar you can throw at it.

Once that smallest debt is gone, roll its payment into attacking the next smallest debt. With each victory, your payment "snowball" grows larger, giving you more firepower against each remaining balance.

How to build your debt snowball

1. List all your debts from smallest to largest balance

2. Make minimum payments on everything except your smallest debt

3. Put all extra money toward your smallest debt until it's gone

4. Move to the next smallest debt, adding the previous payment amount

5. Repeat until everything is paid off

Why it actually works

The debt snowball works because it's about behaviour, not just math. Personal finance is 80% behaviour and only 20% knowledge.

When you quickly knock out that first small debt, your brain gets a hit of success. You think, "I can actually do this!" Those early wins create momentum that pushes you through the larger debts later.

But what about the interest rates?

You might wonder about the debt avalanche method, which targets high-interest debts first. Mathematically, that approach saves more money.

But here's the truth: if you're buried in debt, you don't have a math problem—you have a behaviour problem. Starting with your highest-interest debt (often your biggest balance) means waiting months or years before seeing progress. Most people lose motivation and quit.

The snowball method gives you quick wins that keep you going.

The snowball in action

Let's see how this works with these debts:

• $500 medical bill—$50 payment

• $2,500 credit card debt—$63 payment

• $7,000 car loan—$135 payment

• $10,000 student loan—$96 payment

Say you find an extra $500 monthly for debt repayment:

1. In month one, you pay $550 toward the medical bill ($50 minimum + $500 extra) and it's gone!

2. Now you attack your credit card with $613 monthly ($550 freed up + $63 minimum). It's gone in about four months.

3. Next, your car loan gets $748 monthly ($613 + $135 minimum). It's paid off in under nine months.

4. Finally, throw $844 at your student loan ($748 + $96 minimum) and it's gone in about a year.

Just like that, you've cleared $20,000 in debt in about two years.

Start your snowball today

The debt snowball isn't just a repayment strategy—it's a mindset shift. Each victory builds your confidence and financial muscles. The method works because it recognizes that getting out of debt is as much about psychology as it is about money.

Take that first step today. List your debts from smallest to largest, and focus all your extra money on the smallest one.