Around 80 percent of American adults are in debt in some shape or form. Whether it’s student loans, medical bills, car payments, credit cards. or mortgages, to put it bluntly, the nation has some bills to pay. If you’re one of the millions of people currently in debt, there’s a financial strategy out there that might make your journey to being debt-free a bit easier.
It’s known as the “snowball method,” and it’s meant to help people get into the habit of paying off their debts. The idea behind the debt snowball method is to sort your debts from the smallest balance to largest balance—without including your mortgage, as it’s typically considered as a “good form of debt.” Once organized, you can begin using the snowball method by paying off your smallest debts first. Make the minimum payments on all but your smallest balance, and pay as much as possible toward the smallest debt to pay it off in full as soon as possible.
By paying off your smaller debts first, the idea is you build momentum and grow the amounts you can pay toward larger debts over time. You can picture this strategy visually as a snowball getting bigger as it rolls down a hill: you start with small actions that, over time, make a big difference. For the ins and outs of how the snowball could help you, look no further.