Using the Snowball Method to Repay Debts


One of the big problems with financial debt is the way that it can seem to feed off itself: you end up getting into more debt as you try to repay the loans or credit cards that you’ve already taken out. This vicious cycle can make it difficult to know which debt to pay off first, and the extra stress of trying to work out the best strategy can be paralysing when you are already under a lot of mental strain. If you ever find yourself in this situation then one option to consider is the so-called ‘snowball method’. Here’s how it works.

Start by repaying your smallest debt first

The logic of the snowball method can feel a little counter intuitive. It’s natural to look at your debts and want to start hacking away at the biggest one first. However, by starting with the smallest debt you can often make much better progress. That’s because this method provides a lot of positive reinforcement: you can actually see the progress that you’re making each month, and your brain is rewarded. As you start to knock chunks out of your smaller debts, you build momentum which can help give you the strength needed to repay a bigger debt

Always continue to make minimum payments

Focusing on paying your debts off one at a time doesn’t mean you can forget about the others entirely. Continue to make minimum repayments on all of your debts. Otherwise, your creditor is likely to take further action against you, and this could end up costing you more in the long run. Failing to make minimum payments will also ruin your credit score.

Aim to maximise the amount you can pay each month

The snowball method works best if you can really embrace the fact that you are finally going to get clear of your debts. It’s all about building forward momentum and positive mental attitude. That means finding ways to maximise the amount you’re able to repay. You could consider taking on a second part time job or looking for budget cut-backs to give yourself more cash to play with. Essentially, any spare penny you have should be put towards debt repayment.

Keep going until you reach that final debt

Once you’ve repaid your smallest debt, simply start putting those monthly payments into the next-smallest while continuing to repay minimum amounts on any other debt that you have. Keep going until you’ve reached your final debt. By that point, you’ll hopefully be making a significant repayment every month. This is the snowball method in a nutshell: as much a mental trick as a financial one, it has been shown to give people the motivation needed to get out of debt altogether.

Build some positive financial habits

The final piece of the puzzle is funding a way to stay out of debt. Hopefully, over the course of your repayment plan, you’ll have the chance to build up some positive financial habits. That might mean cutting down on unnecessary spending or finding ways to bring extra income in: whatever it is, it’s important to keep it up once you’ve finished repaying what you owe. That will give you a great grounding for staying debt free in the future.



Comments are closed.