Paying off debt can feel like climbing a mountain. Long, treacherous, and draining. How did we even get here in the first place? And why were we so stupid to sign up to climb a big mountain anyways? Listen, debt does not define you. The system is built on you taking on debt. College prices have skyrocketed that only a select few can afford to pay full sticker price for out of state tuition without student loans. We are in an affordable housing crisis which requires a big mortgage if you even want a chance at purchasing a home. And with everyone flexing their cars, shopping sprees, and European vacations on social media, we are all up to our eyeballs in credit card debt, which coincidentally, make the banks and credit card companies several billion dollars a year. See, it’s not always your fault. The system is built for debt.

But now that you’ve accepted- debt does NOT make you a bad person. Let’s get to the truth of it- you still need to pay it back. That is the only way to get out of debt. So how are we going to make this mountain a bit easier for you to climb?

Introducing: The Debt Snowball Method. 

What is the Debt Snowball Method?

The Debt snowball method is when you pay off your debts one by one with intensity, starting with the smallest and working your way up to the biggest one. Sounds simple enough, right? Then why does debt STILL feel so difficult to pay off? Let’s break it down step by step and by the end, you’ll have the exact game plan to get you out of debt. 

Step 1: Stop Spending on Credit!

This is not the time to take out a car loan, order a door dash takeout with klarna, or swipe that credit card for the airline points. You are focusing on getting out of debt, not getting into more debt! Switch to a debit card or you will feel like you’re pouring water into a leaky bucket.  

Step 2: Write down all of your debts. 

Yup, every single one. Student loans, mortgage, credit cards, Klarna buy now, pay later, the $100 bucks you owe your friend from last week. Everything. Include relevant information like: How much you owe, to whom you owe it, the interest rate, the minimum monthly payment, and payment dates. 

Step 3: Order them from smallest to largest, in dollar amount owed

If you’re doing this in a digital format, it should be easy enough to rearrange them into the proper order. 

Step 4: Pay them off!

There’s only one way to get out of debt, and that is to pay back all the money that you owe. Start with the loan with the smallest dollar amount and pay it off as soon as you can. Celebrate the win! And then move on to the next one on the list, rolling the payment you would’ve made on the previous one (now paid off) into the next one. If you feel like you don't have enough room in your budget, check out our top tips here for increasing your income! 

Why Does this Work?

When you’re able to pay off the smaller loans and cross them off the list, it helps increase your momentum. Your brain gets a dopamine kick of success and wants to keep going! Especially in the beginning of the process, you need the quick wins to keep you going. Paying off debt is as much a mental game as it is a mathematical one. 

Let’s see it in Action:

Klarna Buy Now Pay Later: $500

Credit Card: $1,500

Car loan: $6,000

Student Loan: $15,000

Focus on the Klarna debt by putting every extra dollar in your budget towards that payment while still making minimum monthly payments on the others. 

Then move on to the Credit Card. Now that the Klarna loan is gone, take that money you were budgeting and move it over the Credit Card 1. Bam! You’ll see that balance drop quickly.

Now it’s time for the Car loan! You have two fewer debts on your list now so therefore, two fewer monthly minimum payments to worry about, which means you have that much more room in your budget to put towards the car loan! 

Lastly, those dreaded Student loans. So much extra money in that budget now! Start paying it off and it will shrink faster than ice cubes in a hot drink!

Important Things To Remember For Success!

1. Always be making your minimum monthly payments on ALL your loans. Even if it’s not the smallest loan you currently have, all loans still need to be paid on time at least the minimum monthly amount. If not, you are putting yourself at risk of damaging your credit score which can have further repercussions. 
2. Check the interest rates. Of course, we suggest you pay off all of your debt, however check the interest rates before you start investing too much money into paying it off. If your loan is at an interest rate at 5-6% or lower, it is mathematically more beneficial for you to invest the money instead at a rate of return of 7-10% (based on historical averages). However, debt and personal finance in general is as much a mental and emotional game as a mathematical one, so if you choose to live debt free rather than maximizing the spreadsheet- then go for it! You do you, boo. 
3. Look into getting a debt consolidation loan- This won’t pay off your loans, you still need to do that yourself, but it can help you to lower your interest rate, and simplify the payback process. Now you only have one payment to make rather than several, and at a possible lower average interest rate which can save you some money along the way.
4. Celebrate the Wins! It’s hard to get out of debt. Debt can carry with it shame and embarrassment in a system that is designed for you to fail. So when you’re able to make progress- celebrate! You’re making the courageous decision to put yourself in a better financial position and that’s AMAZING. 

TL;DR

Paying off debt can feel like you’re running on a never ending treadmill. But starting the Debt Snowball method can help you make a plan to focus on achieving your goal of getting out of debt- fast. Stop spending on credit, write down your loans from smallest to largest, and start paying them off in that order. Don’t forget to keep making all the minimum monthly payments on your other loans! Trust us you’ll be amazed at how fast you can build momentum and motivation to knock them out one at a time. Celebrate every milestone and congratulate yourself for making the first big move towards financial freedom!

If you want to keep those money wins going, grab the Ultimate Money Guide to learn how to budget, set goals, and stay on top of your finances—all while crushing debt and building a solid financial future! We are here rooting for you every step of the way!