4 Easy-to-Follow Debt Snowball Tips for 6-Figure Debt
If you’re dealing with large amounts of debt—a.k.a. six figures and up—you may be looking for a debt solution that can help you eliminate your cash woes and finally achieve your financial dreams. One potential answer? Following the debt snowball method.
In this article, we’ll describe how debt snowball is different from debt avalanche, 4 steps to follow for finding snowball success, and why the debt snowball method is so effective.
What is the debt snowball method?
The debt snowball method is a payoff method that focuses on eliminating your smallest balances first. You’ll continue to pay the minimum balances of all your debts, but you’ll put your extra money toward your smallest debt. Once that debt is completely paid off, you’ll focus on paying down the second-smallest debt and so on. The debt snowball method is a great debt solution for individuals who need to feel more motivated to tackle their debt head on.
How is the debt snowball method different from the debt avalanche method?
The debt avalanche method is another popular debt payoff strategy. With the avalanche method, you’ll instead focus on paying off your highest-interest rate debts first. You’ll continue to pay minimum amounts on all your debts, but your extra money will go toward paying down your highest-interest debt. Once that’s paid off, you’ll put extra toward the next highest interest debt. The debt avalanche method is helpful for saving more money overall.
The 4 steps of the debt snowball method
Here are 4 snowball steps to follow to help eliminate large debt amounts:
1. List and sort your debts
First, make a list of all your debts and their minimum monthly payments. Then sort them in order of smallest to largest balances.
2. Allocate extra cash to the smallest debt
You’ll pay all your minimum monthly payments to avoid hurting your credit score and dealing with late fees. But any money left over will go immediately toward your smallest debt amount.
3. Pay, celebrate, and repeat
You’ll continue putting money toward the smallest debt until it’s paid off completely. Then you’ll take a moment to celebrate your success before focusing on paying off the second smallest debt.
4. Enjoy debt-free living
Eliminating debt can help you put your money toward financial goals, such as a retirement fund or honeymoon, instead of towards your interest. Take a moment to enjoy your new debt-free existence and start making plans with what you’ll do with your newfound fiscal freedom.
Why the debt snowball method works
The debt snowball method works because of how motivational it is. Focusing on paying down huge debts can be very discouraging—it could take years to pay off a huge balance. But by starting with your smallest debt, you’re allowing yourself to see a quick win and feel the satisfaction of meeting your goal. It can help you build the confidence and momentum you need to continue your debt payoff journey.
The debt snowball method can help you kiss those debt woes goodbye. By following these 4 steps above, you’ll be well on your way to a better financial future.
