With the debt snowball method, you list your debts in order from ______________ to _________

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This method focuses on paying down your smallest debt balance before moving onto larger ones. The snowball method is all about building momentum as you pay off debt. It may be a good solution to better manage your finances over time.

But before you adopt this approach, here’s what you need to know about the debt snowball method.

What is the debt snowball method?

The debt snowball method was originally made popular by personal finance expert Dave Ramsey. This debt-repayment method (which excludes your mortgage) focuses on paying off your smallest debt balances first while making minimum payments on all other debts.

Once a balance is paid off, you take the funds you had previously allocated to your smallest debt and put them toward the next-smallest balance, essentially building, or “snowballing,” your repayment toward the next balance. This cycle repeats until all of your debt is repaid.

Each balance payoff is a win. It’s a debt-repayment method that may not save you money on interest but could be a great motivator to keep paying off your debt.

Learn more about how to get out of debt in 5 simple steps.

How should you use the debt snowball method?

The snowball method can be broken down into four simple steps.

Step 1

Create a list of all of your debts, excluding your mortgage. Sort the debts in order from smallest to largest balance.

Step 2

Each month, pay the minimum amount on each balance, except the smallest one — put as much cash as you can toward that one. You’ll want to review your budget and figure out how much money you can put toward your smallest balance without jeopardizing the rest of your finances.

Learn more about creating and sticking to a budget with our comprehensive guide to budgeting.

Step 3

After you’ve paid off the smallest balance, roll the extra money you were using for that balance into the monthly payment for the next-smallest balance. Of course, you have to continue making the minimum payments on all other debts.

Step 4

Repeat this process until you’re debt-free.

Advantages of the debt snowball method

The primary advantage of the snowball method is the psychological boost.

When you see debts disappearing, it can increase your motivation to continue paying off debt. And even if you’ve only paid off a small balance, your confidence in the progress you’re making grows.

This strategy may also help you get a better handle on your finances overall — and your stress. By allowing you to focus on one debt balance at a time, the snowball method eliminates worry about how to tackle all of your debt at once.

Disadvantages of the debt snowball method

The biggest disadvantage of the snowball method is the potential for paying more money in interest over time than if you used another debt-repayment method. Since the debt snowball method focuses on the smallest debt balances rather than the balance with the highest interest, your costliest debt may get paid off last.

If you’re worried about wasting money on interest, take an inventory of your credit card APRs and loan interest rates. If you find that the snowball method may cost you too much money in the long run, this strategy may not be the best fit for your debt-repayment needs. Instead, consider the avalanche method — which focuses on paying your highest-interest balances first.

What’s next

The debt snowball method is just one approach to becoming debt-free. If you’re ready to pay off your debt, the best thing you can do is sit down, identify the right debt repayment strategy for you and make a plan. You might consider using a debt repayment calculator, which can be an effective tool to help you better manage your finances.

One of the reasons the debt snowball method has become so popular is because of just how simple it is to implement. Here are five steps to start your debt snowball:

The first step to setting up your debt snowball is taking inventory of your debt.

For some people, even finding information about all of their debts may be a challenge. Start with the debts you’re aware of, such as your credit cards and loans. If you have student loans, log into StudentAid.gov to find more information about those. You can also get a free copy of your credit report via AnnualCreditReport.com to ensure you haven’t forgotten any.

The easiest way to organize your debt is to use a spreadsheet—like this one, from personal finance services firm Tiller—but there are also websites and apps specifically designed to help you accomplish this task. In your list, be sure to include the creditor, debt amount, minimum payment and interest rate.

When you’re taking inventory of your debt, you should generally be as inclusive as possible, including credit cards, loans, medical debt and more. However, since many people choose not to pay off their mortgages early, you don’t necessarily need to include that in the list.

Once you’ve made a list of your debt, it’s time to sort it from smallest to largest. For example, if you have a credit card with a balance of $2,500 and a student loan with a balance of $17,000, your credit card debt would go at the top of the list, with your student loan at the bottom.

Now let’s say your minimum payments add up to $525. You would add them to the spreadsheet in order of their balance, with your credit card at the top and the student loan at the bottom, regardless of their interest rate or monthly payment.

The table below shows an example of what your ordered list might look like:

Paying off debt ahead of schedule is easier said than done since it requires finding additional room in your budget. The good news is that if you’re motivated to do so, you might be able to find places to cut back, even temporarily.

The best way to start is to create a budget and see where your money is going. This will give you an idea of where you might be able to reduce your spending. For example, you might find that your food spending is far higher than you thought it was, or that your streaming services eat up way more of your budget than you thought.

Of course, there is only so much you can cut from your budget. Many people choose to get a side hustle while paying off debt, but if that’s not an option and you don’t have room to cut anything from your budget, the debt snowball may not be the ideal strategy for you. Gauge the affordability of this method using a debt snowball calculator, like this one from debt payment platform Undebt.it.

Each month, put all extra money in your budget toward your smallest debt. Meanwhile, continue making the minimum payment on your other debt to make sure you don’t become delinquent on them.

One way to avoid delinquency on your other debt is to set up autopay, so your minimum payment is made without any effort on your part. This gives you the ability to focus entirely on your smallest debt until it’s fully paid off. Just be sure your checking or savings account has enough cash to afford all your minimum monthly dues—otherwise, you’re at risk of paying overdraft fees to your bank.

Once you’ve paid off your smallest debt, take the funds you were putting towards it and start putting them toward your next smallest debt. This creates a snowball effect, and because you’ve freed up the money from your other debt, your snowball has grown. With each new debt you pay off, your snowball will grow larger and larger.

Let’s go back to our example above. Suppose you have an extra $200 per month to put toward debt. You would start by putting it entirely toward your credit card, as shown in the table below. It’s not until your credit card is fully paid off that you’d take the $300 per month you were putting toward your credit card and start adding it to your auto loan payment.