Debt can feel like a heavy burden that keeps you from achieving your financial goals. Whether it’s credit card balances, car loans, or student loans, the constant drain of monthly payments can prevent you from saving, investing, and ultimately living the life you want. That’s why Step 2 of the financial freedom journey is so crucial: Paying off all debt except the house. And one of the most effective strategies to get there is the debt snowball method.

If you’ve been struggling to pay down debt, the debt snowball approach can help you gain momentum and stay motivated. Let’s explore how it works and why it’s such a powerful tool for crushing debt.

What Is the Debt Snowball Method?

The debt snowball method is a debt-repayment strategy where you focus on paying off your debts from the smallest to the largest, regardless of interest rates. The idea is simple: as you eliminate smaller debts, you’ll free up more money to tackle the larger ones, creating a “snowball” effect as you roll your payments into bigger and bigger balances.

This method, popularized by financial expert Dave Ramsey, is built on human psychology. By knocking out smaller debts first, you gain quick wins, which gives you the motivation to stay committed to your plan. It’s all about building momentum!

Why the Debt Snowball Works

You might wonder, “Why not focus on the debt with the highest interest rate first?” While that might make sense mathematically, the debt snowball method is more about mindset than math. The key to getting out of debt isn’t just the numbers—it’s keeping yourself motivated and sticking with the plan. When you see your debts disappearing one by one, it builds confidence and reinforces the belief that you can get out of debt.

The emotional boost you get from paying off small debts first can be more powerful than saving a few dollars on interest. For most people, it’s the motivation and the victories that make all the difference in completing the journey.

How to Use the Debt Snowball Method

If you’re ready to start using the debt snowball method to tackle your debts, follow these simple steps:

1. List All Your Debts From Smallest to Largest

First, write down all of your debts (except your mortgage) in order of balance size, from the smallest to the largest. Include everything—credit cards, personal loans, car loans, medical bills, and any other debts you have. Don’t worry about the interest rates right now; the focus is on the size of the balance.

2. Make Minimum Payments on All Debts

Once your debts are listed, continue making the minimum payments on all your debts except for the smallest one. This is important to keep your accounts in good standing and avoid late fees.

3. Focus on the Smallest Debt

Now, take any extra money you can find in your budget and throw it at the smallest debt. This is where you need to get intense—cut unnecessary expenses, sell items you don’t need, or even take on a side gig if you can. The goal is to attack that small debt as aggressively as possible until it’s gone.

4. Roll the Payment to the Next Debt

Once you’ve paid off your smallest debt, take the money you were putting toward that payment and roll it into the next smallest debt, along with the minimum payment you were already making. This is where the snowball starts to gain momentum. With each debt you eliminate, you’ll free up more money to put toward the next one.

5. Repeat the Process

Continue this process, knocking out one debt at a time, until all of your debts (except your house) are paid off. Each time you pay off a debt, your snowball gets bigger, and you’ll move through your list faster and faster.

Example of the Debt Snowball in Action

Let’s say you have the following debts:

• Credit Card 1: $500 balance, $25 minimum payment

• Credit Card 2: $1,200 balance, $50 minimum payment

• Car Loan: $5,000 balance, $200 minimum payment

• Student Loan: $12,000 balance, $100 minimum payment

Using the debt snowball method, you would start by putting all of your extra money toward Credit Card 1 while paying the minimum on the others. Once Credit Card 1 is paid off, you would take that $25 payment and roll it into the payment for Credit Card 2, paying $75 each month until it’s gone.

Once Credit Card 2 is paid off, you’d roll that $75 into your Car Loan, paying $275 a month. By the time you get to your Student Loan, you’ll have a huge snowball of extra cash each month, allowing you to wipe out that final debt more quickly than you ever thought possible.

Staying Motivated: Celebrate the Small Wins

One of the biggest advantages of the debt snowball method is the psychological win you get every time you pay off a debt. Each small victory gives you the momentum you need to tackle the next one. Remember to celebrate these milestones! Whether it’s going out for a nice dinner or simply taking a moment to reflect on your progress, acknowledging your success will help keep you motivated.

Finding Extra Money for Your Snowball

To maximize the power of your snowball, you’ll want to find as much extra money as possible to throw at your debts. Here are a few ideas:

• Create a Bare-Bones Budget: Temporarily cut out any non-essential expenses, such as dining out, entertainment, and subscriptions.

• Sell Unused Items: Consider selling things around the house that you no longer need. Sites like eBay, Facebook Marketplace, and Poshmark make it easy to turn clutter into cash.

• Increase Your Income: Take on extra work if possible. Whether it’s a part-time job, freelance work, or starting a side hustle, the extra income can accelerate your debt payoff.

Final Thoughts: You Can Do This

Debt can feel overwhelming, but the debt snowball method is a proven strategy to help you take control of your finances and eliminate your debt one step at a time. Paying off debt isn’t just about the numbers—it’s about creating a mindset shift that gives you the power to shape your financial future. By focusing on the smallest debts first and building momentum, you’ll not only become debt-free faster, but you’ll gain the confidence and motivation to achieve even bigger financial goals.

Start small, stay consistent, and watch your snowball grow. Before you know it, you’ll be free from the burden of debt and well on your way to financial freedom.

Ready to Take Action?

If you’re serious about paying off debt, there’s no better time to start than now. Make your debt list, use the snowball method, and tackle those balances one by one. With focus and determination, you’ll be amazed at how much progress you can make.