The Fastest Way to Pay Off Debt - The Debt Snowball
This post may contain affiliate links. Read more about my affiliate disclosure here.
I haven’t done a debt-payoff summary in a while. In fact, I only did one when I was planning on doing one each month. Huge fail on my part, but I promise one is coming at the end of April.
Today I wanted to share with you how exactly we are paying off our debt using what I believe is the fastest way to pay off debt. You’ll probably hear other methods from other more prominent bloggers, but this is what is working for us. I truly believe it’s the fastest way to pay off debt. It’s called the debt snowball. You can download a free debt snowball checklist here!
Here’s how it works.
This one seems like a no-brainer, but it’s not as easy as it sounds. This is the step that has tripped us up every time we’ve tried to get out of debt in the past. The best thing to do would be to cut up the cards, freeze them in a bowl of water, SOMETHING besides relying on them in case of emergency. That’s what the emergency fund is for.
Don’t be like us. Stop using them cold turkey. It has to be done.
2. List Debts in Order From Lowest Balance to Highest Balance
When you list your debts, be sure to write down the debt company, interest rate, monthly payment, and balance, but list them in order from lowest balance to highest.
You are going to start paying off the debt with the lowest balance first. The reason for that is that it creates a psychological effect of “Wow, I just paid off one credit card! Let’s keep going!” It makes sense. Most people are motivated by quick results, and this method definitely makes that happen.
3. Determine Extra Monthly Debt Payment Amount
After you’ve listed your debts in order from lowest to highest, you’re going to figure out how much extra you can pay each month. If you haven’t made your monthly budget yet, now is a great time. You can find a free monthly budget worksheet in my resource library.
Let’s say you’ve figured out you can pay an extra $250 a month towards debt, and your minimum payment on the lowest balance credit card is $50. Your new monthly payment on that card will now be $300.
Once you’ve determined your monthly debt payment amount, you’ll start paying that amount on the lowest debt payment plus the minimum payment until it’s paid off.
4. Make Minimum Payments on Everything Else
You are focusing on only paying off one debt at a time, so in the meantime, you’ll just want to make the minimum payments on all other debts. It’s instinct to want to pay a little extra on each debt, and if you want to do that, do it, but it won’t knock your debts out any faster.
This method takes focus. Once you’ve paid off that first debt using this method, move on to the next step.
5. Add the Extra Payment Amount to the Next Debt
Now that the first card is paid off, it’s time to add the $300 you were paying on your first debt to the next debt plus the minimum payment on that debt.
So now on your next debt, maybe your minimum payment is $60. You’ll now be paying a total of $360 a month on the second debt until it’s paid off.
When you move to the next debt, you’ll add $360 to the minimum payment of the third debt. Notice how your monthly payment gets bigger and bigger? That’s why it’s called the debt snowball. You’re paying the same amount as you originally determined, but when you pay off each debt, your next debt’s monthly payment gets bigger and bigger.
Subscribe and get access to my FREE resource library AND have new blog posts sent to your inbox weekly!
How It’s Going For Us
We’ve been using the debt snowball method since October, and while we did have some setbacks, we’ve paid off around $3000, and we’re down to just one credit card left! We are so close to being debt free aside from our mortgage, and it’s getting really exciting.
Once our debts are paid off, we are going to focus on saving our six-month emergency fund. I’m going to document that journey here on the blog as well. I’m so excited to get started!
I’d love to know how your debt-free journey is going as well. What method are you using to pay off your debts? Let me know in the comments!
If you are just starting out your debt-free journey, check out my resource library for some free budgeting printables including a debt snowball checklist! I even have a great budget binder that I created in my shop if you’d like to get laser focused and organized in your finances.
And as always, feel free to pin and share this if it was helpful to you. Until next time,
I’m Kari, founder of Mom For More. Do you often lie awake at night dreaming about what it would be like if your family was debt-free? What if you could make that dream come true with a business that allowed you to stay home and be fully present with your babies? Mom for More teaches moms that they can start a home business, become debt-free, and gain more overall peace in motherhood. It equips moms with the tools they need to succeed in their finances, home businesses, and daily lives. You don't have to put your life on hold when you become a mother. It's okay to dream. It's okay to believe that you were made for more. I’d love for you to subscribe and follow along with me!