How To Use The Snowball Debt Method To Get Out Of Debt As Quickly As Possible

Introduction

If you’re struggling with debt and can’t see a way out of it, the Snowball Debt Method could be your way to financial freedom.

Dealing with a lot of debt can quickly become overwhelming and it can cause problems in every area of your life – you don’t sleep properly, your stress levels are through the roof, and the financial struggle is causing havoc for your relationships.

However, help is available.

No matter how much debt you have got yourself into, the snowball method could be an effective way out of it.

In this report, you’ll discover everything you need to know about the snowball method and why it’s been recommended by experts as one of the best ways out of debt.

What Is The Snowball Debt Method?

When you roll a snowball down a snowy hill, with each roll. it gradually starts to get bigger, and the more it rolls, the more momentum it develops.

And by the time it reaches the bottom, it’s reminiscent of a large boulder rather than the small ball it started out as.

The snowball debt method works in very much in the same way – you start off small, then over time it gains momentum and you end up crushing your debt by the time you reach the end.

How Does It Work?

Using the snowball debt method is easy – you simply pay off your smaller debts first, leaving the larger ones until last.

You don’t pay attention to the interest rates of the debts, but instead, you look at the overall amount due, listing the debts from smallest to largest.

You’ll then focus all of your attention on clearing the smallest debt first, and you do this by making just the minimum repayments on all of your debts besides the smallest one.

In short, you throw as much money at the smaller debt as you can each month until it’s cleared.

Once that smallest debt has been paid off, it leaves you with more available cash to start paying off the second smallest debt.

As each debt gets paid off, it leaves you with more available cash to throw at the larger debts, and you keep using the method until all of your debts have been cleared.

Why Is It So Effective?

The main reason the snowball debt method works so well, is because it enables you to see consistent results – you can see the debt going down, which in turn boosts your motivation to continue.

When you’re trying to pay off a larger debt, it can take months to start seeing a major difference, and this can leave you feeling like you aren’t really getting anywhere, draining your motivation to continue.

Once you see that first debt wiped off, it gives you a high you won’t forget in a hurry.

This in turn pushes you on to work to pay off your next debt, keeping the high feeling going.

It also starts to change your behaviour towards your finances – you’ll start making sensible purchasing decisions and develop much healthier spending habits overall.

Debt Snowball Example

To give you the best idea of how it works, let’s look at a quick example.

Janice has built up the following debts:

• $300 in medical bills
• $2000 personal loan
• $6,000 car loan
• $15,000 student loan

To use the snowball method, she will start to make minimum repayments on the student, car, and personal loans.

She’ll then throw every spare dollar she has each month at the medical bills.

She manages to sell some old belongings and cut back to put $150 towards the medical bills in the first month, leaving just $150 to pay the next month.

So, within two months the medical bill is gone.

She then focuses her attention on the personal loan, paying all of the money she would have had to pay on the medical bills towards the debt.

Within six months, that personal loan is gone.

She then continues focusing on the car loan and, finally, the student one.

As you can see, the snowball debt method is very simple to follow. It’s also one of the most effective debt elimination methods you can follow.

So, if you haven’t considered using it before, now is definitely the time to do so.

The Pros And Cons Of Snowballing Your Debt

Now you know what the snowball debt method is, let’s look at some of the pros and cons.

While it is dubbed as the most effective way to get yourself out of debt, like everything, there are still a few downsides you need to be aware of.

By comparing the pros and cons below, you’ll be able to make a much better decision about whether the snowball method is right for you.

The Pros

Let’s start with the pros of snowballing your debt:

• Fast Results: The first benefit is that you’ll start to see results really quickly, which is key to why the method works.

  Obviously, you’ll want to get out of debt as quickly as possible. So, when you start seeing fast results, it shows you that you could be debt-free much sooner than you thought you would be.

  If you’re looking for the fastest way out of debt, this is definitely a method to consider.

• Psychological Benefits: Another advantage of this method is the fact it makes you feel good – as you blast your way through your debts, you’ll start to feel much happier, more in control and a lot less stressed.
• You’ll Find It Easy To Stick To: When you’re in a lot of debt, it’s easy to give up. However, with the snowball method, your motivation is consistently high as you see results pretty quickly. So, if you’re looking for a debt reduction method you can stick to, the snowball method is the perfect option.
• It Changes Your Behaviour: Perhaps one of the biggest benefits of snowballing your debt, is that it doesn’t just get you out of money troubles, but it also changes your behaviour. You’ll start to develop much healthier spending habits, helping you to stay on track even once your debts have been paid off.

These are some pretty compelling benefits, but before you decide whether or not it’s right for you, let’s take a look at some of the cons of the snowball debt method.

The Cons

Although the snowball method definitely has a lot of advantages, it’s not without its potential drawbacks, which include:

• It May Be Difficult To Acquire Credit In Future: If you follow the debt snowball method strictly, its founder, Dave Ramsey, recommends closing down your credit card accounts once they’ve been paid off.

  While this will stop you from falling victim to the same debt trap, it could make it more difficult to generate the credit you need in the future.

  This is because the fewer credit cards and loans you have, the worse your credit score becomes. It doesn’t sound logical, does it, but provided you are making more than the minimum repayments, it builds up your borrowing history, showing lenders you can be trusted to pay the money back.

• You Could End Up Paying More Overall: As the smallest debt is targeted first, if your largest debt has a high interest rate, you could end up paying a lot more back over time.

  So, it may not make financial sense to follow this method until the higher debts have been significantly lowered.

These are the main two disadvantages to be aware of, but for most debts, the snowball method does work well.

However, if you do have higher debts with a high interest rate, you may want to consider a different method until you can get them down.

As you can see, there’s definitely more pros to the snowball method than there are cons. However, it’s still best to consider both the advantages and the disadvantages of the method before deciding whether it’s right for you.

Snowball vs. Avalanche – Which Is Right For You?

You’ve learnt about the snowball debt method, but did you know there’s a snowball avalanche method too?

Both have their pros and cons and can help you to become debt-free.

However, as they work in totally different ways, it’s important to look at which one is most likely going to work for you.

Here, you’ll learn about the avalanche debt reduction method and how it compares to the snowball technique.

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