The snowball technique is the perfect way to help you pay off your debts quickly. The name refers to an analogy of pushing a snowball down a hill. When you stand at the top of a snowy hill and make a snowball, it starts off small. However, when you take the snowball and push it down a hill, as it rolls, it picks up more snow along with it. By the time it gets to the bottom, it’s much larger than it was at the top. The point of the snowball technique is to pick up speed and momentum in the process of getting rid of debt. There are a few key steps to follow when it’s time to kill the debt with the snowball technique.
1. List debts from the smallest to the largest.
Whether it is a personal loan from mom and dad or the pesky student loan that doesn’t seem to disappear, create a list of all of your debts. This is helpful in allowing you to have clarity regarding everything you owe. Once you have a good understanding of everything you owe, make a list of all the debts from the smallest to the largest. Use a loan calculator to get a better idea of the total debt owed and what the bigger picture looks like. Keep in mind that for the snowball to work well, don’t look at the interest rates. Only focus on the actual balance to create your list.
2. Pay the minimum balance on all but the smallest.
Find out what the minimum balance is for each debt. Be faithful and pay the minimum. However, you want to put a lot of momentum toward the smallest debt. Find different ways to come up with the money. You can take up a few side gigs like babysitting, cleaning or dog-walking. Sell items you don’t need and get creative to come up with the cash to eliminate the smallest debt.
3. Apply the same amount to the new smallest debt.
Once the smallest debt is eventually paid off, use that same momentum to pay off the new debt. Continue to find creative ways to come up with the money and get rid of the debt. This momentum is like the snow that the snowball picks up as it goes down the hill. The more intense you become about getting rid of the debt by any means necessary, the quicker it will happen.
4. Continue until all debt is paid off.
There may be times when you might feel tempted to give up and fall off the wagon. However, once you’ve lost momentum, it’s hard to rebuild it again because it’s directly linked to behavior modification. Just remember to keep pushing to eliminate the debt. One of the best ways to help you maintain momentum is to remember why you’re doing this in the first place. Everyone needs to have “why” factor that will help them push through the rougher patches. Whether you’d like to go on lots of vacations or shop to your heart’s content, figure out a future reason that can help you move forward.