How the Debt Snowball Works

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You may have heard of Dave Ramsey’s debt snowball as a popular method for getting out of debt. We’re going to share how the debt snowball works so you can decide whether it’s a smart way for you to get your debt paid off.

The debt snowball method has a lot of great reasons for being one of the most popular methods of paying off debt quickly. But is it right for you?

Let’s find out.

What is the Debt Snowball?

The debt snowball is debt payoff method where you list your debts from the smallest debt to the largest debt. Don’t worry about the interest rates you’re paying; just list the debts in order from smallest to largest.

Once you pay off one debt then you roll the money you were paying on that debt into the next smallest debt. Think of the proverbial snowball rolling down the hill.

This method is designed to help you pay off your debt as quickly as possible.

Your goal will be to “snowball” your payments, adding more money to each one as you tackle the debts one by one, paying off the debts and creating your debt snowball.

As your proverbial snowball rolls down the hill, the snowball gets bigger and bigger. In the same way, the debt snowball method of paying off debt calls for you to snowball your debt payments into bigger payments as you tackle each debt.

As you continue to put additional monies onto each minimum debt payment, the debts get paid off faster and faster. And you pay more extra money onto each debt as the debts get paid in full in order from smallest to largest.

The reason you pay the debts in order from smallest to largest is because it allows for some fast success in eliminating debts from your line item chart. And that will give you emotional momentum and encouragement as you see your debts disappearing.

Here’s a detailed breakdown of how the debt snowball works.

Start With Your Budget

When you make your monthly budget each month, you’ll have a list of each of your debts along with the minimum monthly payment included in that budget. Let’s use this example:

Debt Minimum                               Payment                                   Total Balance

First credit card                                      $25.00                                            $225.00
Second credit card                                 $50.00                                            $450.00
Third credit card                                   $150.00                                          $5,000.00
Car loan                                                  $450.00                                       $15,000.00
Mortgage                                              $1500.00                                      $250,000.00

So you’ve got all of these debts and payments. And you’ve got your other living expenses. Using a budget–and sticking to that budget–is a key factor in the success of the debt snowball.

We recommend using a zero-sum budget. A zero-sum budget is a budget that assigns every dollar of income you earn a designated job. In other words, there is no “extra” income left over at the end of the month.

You budget in dollar amounts for everything from monthly bills to entertainment spending, giving each category specified dollar amounts. For example, you’ll include money for hitting the clubs with friends and a designated amount of money each month that you can spend on whatever you wish.

You Have to Stick to Your Budget

The important part of success in the zero-sum budget is that you stick to the budget amounts you’ve allotted in each area. For instance, let’s say your extra spending money budget line gives you $200 a month to spend on whatever you want.

If you spend that entire $200 on a weekend shopping spree at the beginning of the month, you’ve got to refrain from spending any more extra spending during the month. Or you’ve got to find another category of spending that you can take from–groceries for instance.

But do your best to stick to the allotted amounts in your budget. Sticking to your budget is key to making the debt snowball work for you. Here’s why.

Making Your Debt Payments

Sticking to your budget is how the debt snowball works to help you pay your debts off faster. Using the budget we created above, you’ll see that you should pay off credit card #1 in roughly ten months if you’re making minimum payments only.

Once that credit card is paid off, you’ll take that $25 you were paying on that card each month and add it into your payment for credit card number two. In other words, that payment will now be $75 per month instead of $50 per month.

And after that credit card is paid off, the extra $75 from that card will go toward credit card #3 each month, making that payment $225 per month.

This “snowballing” of the payments will allow for a lot of extra money to be added toward your debt payments each and every month. After the credit cards and loan are paid off, the money that was being used for those payments will go toward the mortgage balance.

Think about it: By the time this fictitious budgeter gets their cards and car payment paid off, they’ll have an extra $675 every month to pay as an additional principal payment on their mortgage.

That equates to an extra $8,100 in payments each year. In the case of our $250,000 mortgage holder, that can cut as much as 15 years off of their mortgage payments.

Finding Extra Income for Your Debt Snowball

And here’s where the debt snowball method really gets good.

As you design your budget, you may be able to find even more income each month that you can add on to the smallest debt payment you have.

Using the extra income you have in your budget to help grow that debt snowball is what’s going to help you get out of debt even faster. Let’s say that after you add up all expenses and compare them with your income, you find you’ve got an extra $100 per month with nowhere to go.

Put that $100 as an additional payment onto your smallest debt. After that’s paid off, you’ll roll it into the next debt payment just like you do with the minimum payment for the smallest debt.

Another additional $100 on your debts will really fast track debt payoff.

Here are some ways you may be able to find some extra income each month to make your debt snowball get bigger as you pay off your debts.

Cutting Expenses

One way to find extra income for your debt snowball is to cut your expenses. Maybe you spend less money on going out each month. Or you ditch going out to eat and eat all your meals at home.

You could cut your grocery spending or drop expenses you don’t need, such as cable TV subscriptions or expensive salon trips. You could shop around for car insurance and find cheaper rates.

Or you could sell your car and buy a cheaper one you can pay for with cash. Go through each line item in your budget and see if there’s a way you could reduce it or eliminate that line item.

Then take all of the money you save each month by doing that and put it onto your debt snowball. That will make your debt snowball even bigger and help you pay your debt off even faster.

Increasing Your Income

Another way to make your debt snowball get bigger is to find ways to increase your income. You can do that in a number of ways. Here are some ideas.

Increase Your Income at Your Main Job

Can you find ways to increase your income at your main job? Can you pick up some overtime hours? Or, can you ask for a raise?

Another idea might be to go for a promotion. Is there a job opening at work that will allow for a larger salary? Check with your boss and ask if there is any way you can earn more money at work.

Get a Second Job

Getting a second job might be a good option for you to increase your income. Can you deliver pizzas? Work retail during the holidays? Clean offices at night?

Scour your local want ads or Craigslist site to see who’s hiring for a second job. This can be a permanent job or a temporary job–you decide. Just be sure you put all of the net earnings toward paying off your debt using the debt snowball.

Start a Side Hustle

A third option for increasing your income is to start a side hustle. What skills do you have that you can turn into extra cash? Can you work as a handyman? What about babysitting kids? Or caring for or walking dogs?

Maybe you can tutor kids online. Or sell your t-shirt designs on a site like Redbubble. Another idea is to work online as a virtual assistant or social media manager. You could drive for Lyft or deliver groceries for Instacart.

There are dozens of ways you can earn thousands of dollars really quickly. You just have to figure out which of your skills are best put to use given the area you live in and your available time.

Sell Your Stuff

Another way you could find extra money to put toward your debt snowball is to sell your stuff. Do you have stuff lying around in your closets and storage area that you no longer use? Consider selling it on Craigslist or a similar site and getting extra cash you can use to pay off debt.

A good rule of thumb when deciding what to sell is to ask yourself one question: Have I used this item in the past year?

If you haven’t, consider selling it (heirloom and other emotionally impactful items excluded).

Whether it’s a part-time job, your own personal side hustle business, or getting a promotion at work, any extra income you gain will allow you to speed up the debt snowball process.

How the Debt Snowball Works Better Than the Debt Avalanche

Some people recommend paying off the debts that are charging you the highest interest rate first. This method of debt payoff is sometimes called the Debt Avalanche. You may be wondering why we’re not recommending paying off the high interest debts first. After all, won’t paying off the high interest debts first save you more money in the long run?

Yes, it probably will. However, debt is a huge psychological burden for many people. Imagine you’ve got eight or nine or ten debts staring you in the face. It might feel a lot like you’re being ganged up on by neighborhood bullies.

The faster you can knock those debts out, one-by-one, the less “bullies” you’ll have pushing you around. Kicking those “bullies” to the curb will give you the confidence and strength you need to keep pushing that debt snowball forward. In other words, it will give you more momentum.

Conversely, if you tackle the highest interest debts first you may not see a debt totally paid off for many months. This can be wearying from a psychological standpoint and cause you to give up on your debt payoff goals.

Some people aren’t phased by the long list of debts in front of them. They do well with paying off the highest interest debts first. However, most prefer the psychological momentum they gain by knocking out the smaller debts super fast. Even if it does cost them a bit more money in the long run.

Only you can decide if you should choose to pay off the higher interest debts first instead of working the debt snowball method.

Should I Consolidate My Debt?

You can also make a case for consolidating your debt into one large balance and one payment. However, that method can also be wearying. This is because it will likely be quite time before that large loan is paid off. This is especially true if you’ve got a lot of debt. And if you haven’t changed your money habits, a debt consolidation loan can lead to even more debt.

But again, the choice is yours. You know yourself better than anyone, and you know how to best motivate yourself to reach lofty goals.


The debt snowball is a tried and proven method millions of people have used to get out of debt. It’s simple to use and allows for fast wins as you knock your debts out from smallest balance to largest balance.

And adding extra money to your snowball by decreasing your expenses or increasing your income will help your debt snowball get even bigger. And that means you’ll get your debt paid off even faster.

Now that you know how the debt snowball works, will you use it to pay off your debt? Or, have you used the debt snowball in the past? If so, did it work for you? What did you like about it?

What did you not like about it? Feel free to share your thoughts in the comments section.