Getting rid of debt and taking control of your finances is a noble and worthy goal, but it’s not really a task people associate with fun or excitement.
In fact, cleaning up debt can be something of a chore. If you’ve got a lot of student loan debt or you’re sinking under the weight of your credit card balances, you might feel like you’ll never pay everything off. This feeling can quickly drag you down. Debt can even lead to mental health problems, such as depression.
However, having a debt repayment strategy — and finding ways to stay motivated while you pay down your bills — can help you stay positive throughout your journey to financial health.
When you’re sitting on a mountain of debt, it can be difficult to know where to begin. This is where the “snowball method” can help.
With the snowball debt repayment method, you pick your smallest debt first and dedicate yourself to paying it off.
This doesn’t mean you stop paying your other bills. Instead, you identify the smallest, most manageable debt and start putting extra money toward that debt each month.
For example, if you have a credit card with a $1,000 balance and a minimum payment of $50, you could start doubling your payment every billing cycle. By sending $100 every month, you reduce your debt more quickly.
Where it might take you 24 months and $198 in interest (assuming your card has an 18% interest rate) to pay off your debt making monthly payments of $50, making $100 payments means you’ll pay off your debt in just 11 months with $92 in interest.
Once you’ve paid off your credit card, you simply move on to the next debt — and you’ll have more extra cash available to tackle in, since you got rid of the $1,000 credit card balance.
In this way, your repayment plan starts to snowball. It begins slowly and then gradually picks up steam, rolling over debts and eliminating them.
The snowball method is effective because it lets you start the smallest debt, working your way up to the debt with the highest interest rate. The snowball method gives you a psychological boost, with every debt you pay off however small.
It also keeps you motivated by allowing you to set realistic goals. As you pay off each debt, you can reward yourself for accomplishing each goal.
You can snowball your debt repayment, but you can also “avalanche” it. If you’re unfamiliar with the debt avalanche method, it’s quite similar to its snowball cousin.
However, instead of picking your smallest debt and paying it off first, you tackle the debt with the highest interest rate — while continuing to make minimum payments on all your other debts.
Once your first debt is paid off, you move to the debt with the next highest interest rate, and so on. With the debt avalanche method, you save money over time by avoiding high interest rates.
Which is better debt snowball or debt avalanche?
In the battle between the snowball and avalanche debt repayment strategies, the clear winner is . . . whichever one works best for you.
That is, there’s no right or wrong way to pay off your debts. For many people, the snowball method works because it allows you to take on a smaller, more manageable debt and conquer it.
This can give you a sense of accomplishment that motivates you to continue on your debt repayment journey.
However, the debt avalanche method might make more sense if you have one or two debts with crushing interest rates.
The snowball method is recommended for your who has a cash flow problem. The down side with snowball method is, you end up paying more in interest. However with every debt you knock off, you get more motivated to tackle the next.
That is why Dave Ramsey says that the snowball system is about behavior modification, motivation and not math.
Before you decide which strategy to use, make sure you do the math for all your debts. Get started with a free debt snowball calculator.
Tips for Staying Positive While Paying Off Debt
Having a positive attitude can make it easier to stick to your financial goals. However, there’s no getting around the fact that working your way out of debt requires sacrifices.
If you have a significant amount of debt, paying it all off can also take several years. So how do you stay focused and motivated when you’re constantly cutting back and pinching pennies? Here are six tips to help you stay committed to achieving your goals.
What is your primary reason for getting out of debt quickly? Maybe you’re a new parent with student loan debt, and you want to become debt-free before your child starts school.
Or maybe you’re approaching 30 and want to become free of all debt before your milestone birthday. If you’re older, getting rid of debt can mean having extra cash to put toward your retirement.
Whether it’s greater security, independence, a love of travel, or just knowing you’re more financially sound, having a reason for becoming debt-free can help you stay motivated.
Whatever your reason, it can help to make a visual representation of your goal. For example, a photo of your kids near your computer or the area where you pay your bills can be a great way to keep the big picture in mind as you pay off your debt.
Just about everyone has stuff in their home that they no longer use or need. You can put these items to work by selling them and using the cash to pay down your debt.
For example, if an old treadmill is collecting dust in your basement, sell it and put the money toward a bill.
Scour your spare room, garage, and basement for old appliances, lawn equipment, and knickknacks you can live without.
The money you make can give you a quick injection of cash that instantly pays off a debt and gives you the boost you need to keep the momentum going.
Keeping track of your progress is an excellent way to stay motivated — which is probably why you see it in weight loss programs and exercise regimens.
When you can actually see yourself accomplishing your goals, and you can prove that your hard work is paying off, you’re more likely to stick with a plan or routine.
There are many free debt repayment tracking tools available online. Personal finance blogger Derek Sall shared his free snowball method tracker with Business Insider, which you can find here.
Being frugal doesn’t mean you can’t have fun, and committing to a debt repayment plan doesn’t require sacrificing entertainment, dinners out, or vacations with your family.
In fact, treating yourself after you’ve paid off a debt is a great way to keep you in the money-saving game. The key is to celebrate in moderation.
For example, if you skip your morning coffee as a way to save money, treat yourself to your favorite yummy coffee treat at the end of the month.
If you love shopping, set aside $200 for a new outfit and shoes for every bill you pay in full. Or splurge on a nice dinner out with your partner for every month you save by packing a lunch instead of grabbing takeout or lunching with coworkers.
Join Support Groups
Paying off debt can be a challenge, but you don’t have to do it alone. Surround yourself with like-minded people by looking for groups committed to a debt-free lifestyle.
You can find hundreds of groups, blogs, podcasts, and other resources online. For example, Facebook has dozens of budgeting and money management groups broken down by unique interests, such as paying off student loans, paying your mortgage early, or managing money as a parent of young children.
You can also tune in to podcasts to hear about people who’ve been in your shoes and paid off their debt.
A good place to start is Dave Ramsey Show’s podcast, which features personal stories of people who’ve used the snowball method to become debt-free.
Sometimes, making yourself a little uncomfortable is a good way to keep your eyes on the prize.
Now, this doesn’t mean you have to wear shoes that pinch or go without the back support cushion on your desk chair. That’s not the kind of comfort we’re talking about.
Rather, make some sacrifices or take on some inconveniences that push you to get back into your comfort zone.
For example, cut back on gas by taking the bus to work rather than filling up your tank each day. If you do this for six months, you could save hundreds of dollars on fuel — and then use that money to pay off a credit card.
Or you could commit to three months of dining in and preparing your own meals until you pay off a debt. Once you save up enough to eliminate a bill, reward yourself with dinner at your favorite restaurant (and don’t skip dessert).
Some people have taken the “discomfort” strategy to extremes by moving in with parents or downgrading to a tiny home. One man even converted his van into a living space to get rid of his debt.
Fortunately, you probably don’t need to bunk in your car to become debt-free. However, these examples show how making yourself a little less comfortable can be the jumpstart you need to achieve your financial goals.
Getting rid of your debt and practicing smart money management isn’t always a smooth road. It’s easy to get bogged down by budgets and tracking apps.
If you remember why you’re doing this, however, and you take time to celebrate your victories, you’ll find it easier to stay the course.