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The debt snowball can offer an impactful path towards financial freedom, providing a simple but motivating method to pay off debt. 

If you’re overwhelmed by debt, the debt snowball can help you generate quick (and long-term) wins that motivate and inspire you as you work toward your financial goals.

You might have also heard of its cousin, the debt avalanche. Although the principle of paying off debt is the same between the two, the methods are entirely different.

With the debt snowball, you focus on paying off the lowest balance debt using a strategy to create quick wins that build momentum over time. Conversely, the debt avalanche focuses on paying off the highest interest debt, regardless of the balance.

There are benefits of both, naturally, but in this article, we’ll talk about how you can use the debt snowball to eliminate debt and generate long-term wealth as you work toward financial freedom.

Understanding the Debt Snowball

It’s simple to get started with the debt snowball. You start by paying off your lowest balance debt first, then slowly work your way up to the largest balance, regardless of the interest rate. 

The idea is that you make minimum payments on all your debts, except for the smallest one. With the smallest debt, you throw whatever you can at it – any extra dollar you save, earn, or can otherwise scrape together. 

Once that smallest debt is paid off, you take the money you were paying on it (the minimum payment plus any extra) and add it to the minimum payment of your next smallest debt, creating a larger “snowball” payment.

As you might imagine, you can pick up steam pretty quickly, paying off your debt in a rapidly increasing manner.

Why the Debt Snowball Over the Debt Avalanche?

If you’re familiar with the debt avalanche, you might wonder why you would use the debt snowball. After all, the better wealth-building / money-saving strategy is to pay off your highest interest debt first, right?

If your goal is to focus on wealth building, you’re correct. However, you shouldn’t underestimate the psychological benefit of paying off debt.

When you pay off a debt, it feels incredibly satisfying. This can motivate you to save more and find new, creative ways to pay off your remaining debt faster. 

In fact, this psychological impact can be so motivating that you reap greater rewards than possible with the debt avalanche.

Ultimately, the choice is up to you, but I encourage you to ask yourself this simple question:

“Would the psychological impact be of greater benefit to me and my goals in my present circumstances?” If your answer is yes, then consider using the debt snowball.

The Psychological Power of the Debt Snowball

Let’s talk a bit more about the power of that psychological impact… If you’ve seen my previous posts on money mindset, then you know that your mindset can help or hinder you on your journey to financial freedom.

While the debt snowball might not always be the mathematically fastest way to pay off debt, seeing those smaller balances disappear quickly provides a sense of accomplishment. This encourages you to stay motivated and stick with the plan. 

Early wins can be crucial for building momentum and changing your financial habits so that you can tackle larger debts and prioritize wealth building. This feeling of progress can be especially helpful when facing a mountain of debt.

Ultimately, when it comes to achieving financial freedom, discipline is key. Generate those quick wins and you’ll be more likely to stick with your financial goals in the long-term, hence allowing you to achieve financial freedom.

For more on the topic of building a strong money mindset, I encourage you to read any of the following series of posts:

How Your Money Mindset Shapes Your Financial Freedom Journey

How to Build a Money Mindset for Your Financial Freedom Journey

10 Ways Financial Independence Leads to a Happier Life

How to Work Less, Live More: Build a Financial Freedom Mindset

How to Create Your Debt Snowball

It’s easy to get started. Follow the 5 steps below, and you’ll be well on your way to creating your debt snowball.

1. List Your Debts: Start by listing all your debts from the smallest balance to the largest. Include the minimum payment and interest rate for each.
2. Make Minimum Payments: Continue making the minimum payment on all your debts except for the one with the smallest balance.
3. Attack the Smallest Debt: Put every extra dollar you can find towards paying off the debt with the smallest balance. This is your initial “snowball.”
4. Create a Snowball Effect: Once the smallest debt is paid off, take the total amount you were paying on it (minimum payment + extra) and add it to the minimum payment of your next smallest debt. This larger payment is your growing “snowball.”
5. Repeat the Process: Continue this process, tackling each debt in order of size, adding the previous debt’s payment to the next. Your payment will “snowball” as you eliminate each debt.

Building Momentum with the Debt Snowball

As you pay off each debt, your “snowball” of available funds grows larger, creating powerful momentum you can use to eliminate debt with increasing speed. 

Seeing those smaller balances disappear can be incredibly motivating, helping you tackle the larger debts that follow. This visual progress can be incredibly empowering, helping you stay focused on your ultimate goal of achieving financial freedom.

Empowering Your Financial Journey

The debt snowball offers a tangible and motivating approach to paying off debt. By focusing on small victories and building momentum, you can empower yourself in your finances and move closer to a life of financial freedom.

Regardless of your chosen method (debt snowball or debt avalanche), you’ll have more resources to invest and build wealth as you move toward a more debt-free life, bringing you closer to financial independence.

To learn more about how to take control of your finances and achieve financial freedom, check out my free ebook, “7 Ways to FIRE Your Career.”

The guidebook provides practical strategies and actionable steps to help you overcome obstacles and build a secure financial future. With it, you can design the life you’ve always dreamed of – one built on what matters most to you.

Get the free ebook to begin building your dream life.

Have a question or want to learn more? Leave a comment below!

Now that you’ve learned how to use the debt snowball to eliminate debt, you might wonder how else you can FIRE Your Career. Check out the posts page for more ways to FIRE Your Career and achieve financial freedom.

FIRE Your Career: Achieve Financial Freedom Through Your Career & Spend MORE Time Doing What You Love.

Resources I Recommend in This Article:

7 Ways to FIRE Your Career (a free ebook to help you build a foundation for financial freedom)

Resources I Frequently Recommend:

Quit Like a Millionaire (a great FIRE book with a scoring system to help you select a degree or job field)

ClickUp (my recommended goal-tracking and project-management tool)

Rich Dad, Poor Dad (a great intro to financial freedom book)

The Bogleheads’ Guide to Investing (a great intro to investing book)

Strengths Finder (book to help you uncover your innate strengths, includes a free personality quiz)

Other Articles Mentioned in This Post:

How Your Money Mindset Shapes Your Financial Freedom Journey

How to Build a Money Mindset for Your Financial Freedom Journey

10 Ways Financial Independence Leads to a Happier Life

How to Work Less, Live More: Build a Financial Freedom Mindset