How to use the debt snowball method to payoff credit card debt

August 20, 2022 2 min read

 

The Money Bag Newsletter by Financial Footwork

What is the debt snowball method, and how can I use it to pay off my debt?

Let’s dive into the debt snowball method and give you the exact framework for how to use this debt payoff method.

The Snowball method is very simple and straightforward to set up and execute. 

Step 1: Write out your credit debt (all of the debt collectively–this means all of the debt you have). 

Write down all of the credit card & loan accounts on a piece of paper or using an excel document. This allows you to see everything you owe in one place. This might be stressful, rip off the Band-Aid and write it all out so you can proceed with this

Step 2:Organize your debt

Once everything you owe is on paper or on an excel document. Start by organizing and prioritizing your debts fromsmallestbalance tolargestbalance.

Step 3: Start making payments!

You've got your debt on paper, organized from smallest to largest credit balances, now start paying off yourLOWESTbalance credit card and tackle your debt a payment at a time.

 

Beginner Budgeting Course

 

Now let’s look at an actual example of how the debt snowball could work.

List out all of your debts, either on an excel document or grab a good old fashion piece of paper.

Here is what you will document on your list in four individual columns:

-THE CREDIT ACCOUNT NAME (who you owe money to) Discover, American Express, a bank, etc).
-THE BALANCE you owe on the account: current balance down to the penny -
-THE INTEREST RATE for the debt: how much interest are you paying
-THE MONTHLY MINIMUM PAYMENT - you can find this on your statement 

Once everything is on paper organized your debts from the smallest balance to largest balance, now you have your priority list and can start tackling your payments. Remember, during this process you need to make ALL of your monthly minimum payments. Any left over money should be used to tackle the first credit account on your list which will have the smallest balance.

Implementation is key, you have to get all of your information in one place, set your priority list, then chip away balance by balance, card by card.  Use your monthly budget to tackle each payment and keep track of your debt payoff as you go. Seeing your success will help you stay focused on your goals. 

 

Financial Footwork YouTube Channel


Leave a comment

Comments will be approved before showing up.