The Debt Snowball Method: A Detailed Breakdown and Walkthrough. Month by month breakdowns of the Debt Snowball Method

If you want to get out of debt on your own the first thing you should do is setup a plan to help you establish a dedicated course of action for eliminating your debts in their entirety. First you should create an income and expense evaluation and proper budget outlining how much monthly cashflow you have and will be able to use towards aggressively paying down debt. Feel free to use our monthly budget calculator, it should save you some time from having to look up monthly spending categories.

Once you have a budget setup you'll want to implement a plan to slowly chip away at your debt each month and make sure you are utilizing all savings to the best of your ability.

An example of our debt snowball method in action:

$50,000 total debt.

9 credit cards.

2 personal loans.

Bank of America #1 - $8,000 – minimum payment of $200.

Bank of America #2 - $7,000 – minimum payment of $175.

Citi #1 - $4,000 – minimum payment of $100.

Citi #2 - $6,000 – minimum payment of $150.

Chase #1 - $5,000 – minimum payment of $125.

Chase #2 - $2,500 – minimum payment of $62.5.

US Bank #1 - $1,000 – minimum payment of $25.

US Bank #2 - $1,500 – minimum payment of $37.5.

Barclays - $3,000 – minimum payment of $75.

Sofi Personal Loan - $9,000 – monthly payment due of $350.

Lending Club Loan - $3,000 – monthly payment due of $150.

Total monthly minimum payments = $1,450.

Available extra money to more aggressively pay off debts besides what is going towards minimum payment due dates = $2,000.

In this scenario you should pay these accounts in the following order: US Bank #1, US Bank #2, Chase #2, Barclays, Citi #1, Chase #1, Citi #2, Bank of America #2 and then finally the Bank of America #1 account. Moreover, we will treat the loans as constant in this scenario and not prepay them any earlier. We will also say that the lending club only has principal payments left (no interest) and the Sofi Personal Loan will be completely paid off in another 36 months. On top of this, we will say that minimum payments do not actually pay off the balance (they just keep the balance the same), so if you make a minimum payment on a credit card account it doesn’t actually move the needle and the balance stays the same. Our goal is to create a unique but realistic option to pay off this debt.

Paying the accounts in the following order will allow you to reduce your accounts and debt balances in chronological order from lowest balance to the highest balance. In doing so, this will allow you to eliminate your accounts one by one and eventually get rid of all accounts and reduce your total number of outgoing monthly payments faster than any other route. The debt snowball method is best for eliminating your accounts the fastest and is also subsequently the best option for simplifying your monthly payments since as each balance goes to $0 you have less subsequent accounts to worry about. As you pay off each individual account you’ll have fewer monthly payments to worry about and more available cash for paying down the other accounts.

For ease of demonstration and understanding we will keep the credit card balances the same even if monthly minimum payments are applied each month. To more easily portray this debt repayment’s strategy, we will also have loan payments applied directly to the balance and ignore interest rates for them.

So, this is how this actually ends up working out and looking as you undergo this process:

Month 1 – Minimum payments due $1,450. $2,000 budget. $550 leftover. An extra $550 is applied to US Bank #1 bringing the balance down to $450.

Month 2 – Minimum payments due $1,450. $2,000 budget. $550 leftover. An extra $450 is applied to US Bank #1 ($0) and $100 is applied to US Bank #2 ($1,400).

Since US Bank #1 is now completely paid off we have more available cash to designate to other accounts and our total monthly minimum payment liability is reduced.

Month 3 – Minimum payments due $1,425. $2,000 budget. $575 leftover. An extra $575 is applied to US Bank #2 leaving that total balance to $825.

Month 4 – Minimum payments due $1,425. $2,000 budget. $575 leftover. An extra $575 is applied to US Bank #2 ($250).

Month 5 – Minimum payments due $1,425. $2,000 budget. $575 leftover. An extra $250 is applied to US Bank #2 ($0) and $325 is applied Chase #2 ($2,175).

Since both US Bank #1 and US Bank #2 are now completely paid off we have more available cash to designate to other accounts and less of a monthly liability on all other accounts. Total required monthly minimum payments now sit at $1,387.5

Month 5 – Minimum payments due $1,387.5. $2,000 budget. $612.5 leftover. $612.5 is applied to Chase #2 ($1,562.50).

Month 6 – Minimum payments due $1,387.5. $2,000 budget. $612.5 leftover. $612.5 is applied to Chase #2 ($1,562.50).

Month 7 – Minimum payments due $1,387.5. $2,000 budget. $612.5 leftover. $612.5 is applied to Chase #2 ($950).

Month 8 – Minimum payments due $1,387.5. $2,000 budget. $612.5 leftover. $362.5 is applied to Chase #2 ($337.5).

Month 9 – Minimum payments due $1,387.5. $2,000 budget. $612.5 leftover. $337.5 is applied to Chase #2 ($0) and $275 is applied to Barclays ($2,725).

Since the US Bank #1, the US Bank #2 and the Chase #2 are now completely paid off, our monthly minimum payment liability has dropped down $1,325 and we have more cash available for our snowball method.

Month 9 – Minimum payments due $1,325. $2,000 budget. $675 leftover. $675 is applied to Barclays ($2,050).

Month 10 – Minimum payments due $1,325. $2,000 budget. $675 leftover. $675 is applied to Barclays ($1,375).

Month 11 – Minimum payments due $1,325. $2,000 budget. $675 leftover. $675 is applied to Barclays ($700).

Month 12 – Minimum payments due $1,325. $2,000 budget. $675 leftover. $675 is applied to Barclays ($25).

Month 13 – Minimum payments due $1,325. $2,000 budget. $675 leftover. $25 is applied to Barclays #1 ($0) and $650 is applied to Citi #1 ($3,350).

Since the US Bank #1, the US Bank #2, the Chase #2 and the Barclays are now completely paid off, our monthly minimum payment liability has dropped to $1,250 and we have more cash available for our snowball method of payoff.

Month 14 – Minimum payments due $1,250. $2,000 budget. $750 leftover. $750 is applied to Citi #1 ($2,600).

Month 15 – Minimum payments due $1,250. $2,000 budget. $750 leftover. $750 is applied to Citi #1 ($1,850).

Month 16 – Minimum payments due $1,250. $2,000 budget. $750 leftover. $750 is applied to Citi #1 ($1,100).

Month 17 – Minimum payments due $1,250. $2,000 budget. $750 leftover. $750 is applied to Citi #1 ($350).

Month 18 – Minimum payments due $1,250. $2,000 budget. $750 leftover. $350 is applied to Citi #1 ($0) and $400 is applied to Chase #1 ($4,600).

Since the Citi #1 account is a now a $0 balance account we can use what would have normally been applied to that minimum payment and applied it to other accounts to more aggressively pay them down.

Month 19 – Minimum payments due $1,150. $2,000 budget. $850 leftover. $850 is applied to Chase #1 ($3,750).

Month 20 – Minimum payments due $1,150. $2,000 budget. $850 leftover. $850 is applied to Chase #1 ($2,900).

Month 21 – Minimum payments due $1,150. $2,000 budget. $850 leftover. $850 is applied to Chase #1 ($2,050).

Month 22 – Minimum payments due $1,150. $2,000 budget. $850 leftover. $850 is applied to Chase #1 ($1,200).

Month 23 – Minimum payments due $1,150. $2,000 budget. $850 leftover. $850 is applied to Chase #1 ($350).

Month 24 – Minimum payments due $1,150. $2,000 budget. $850 leftover. $350 is applied to Chase #1 ($0) and $500 is applied to Citi #2 ($5,500).

Since the Chase #1 account has a $0 balance we can apply the $125 that would have went towards the monthly minimum payment towards more aggressively paying down the next account on our list.

Moreover, since we have made monthly payments on the lending club for 24 months that loan account has been paid in its entirety and has a zero balance. It no longer requires a monthly payment and we can subtract it from a monthly liability and use the left-over funds to pay down the next account on the list. So we can also remove the $150 a month that was going towards that loan.

New monthly minimums due: $875.

Month 25 – Minimum payments due $875. $2,000 budget. $1,125 leftover. $1,125 is applied to Citi #2 ($4,375).

Month 26 – Minimum payments due $875. $2,000 budget. $1,125 leftover. $1,125 is applied to Citi #2 ($3,250).

Month 27 – Minimum payments due $875. $2,000 budget. $1,125 leftover. $1,125 is applied to Citi #2 ($2,125).

Month 28 – Minimum payments due $875. $2,000 budget. $1,125 leftover. $1,125 is applied to Citi #2 ($1,000).

Month 29 – Minimum payments due $875. $2,000 budget. $1,125 leftover. $1,000 is applied to Citi #2 ($0) and $125 towards the Bank of America #2 ($6,875).

Since the Citi #2 account now has a $0 balance, we can use whatever money would’ve went towards that account and use it to more aggressively pay down the remaining accounts with balances in our debt snowball pay off method. This lowers out total monthly minimums due by $150.

Month 30 – Minimum payments due $725. $2,000 budget. $1,275 leftover. $1,275 is applied to Bank of America #2 ($5,600).

Month 31 – Minimum payments due $725. $2,000 budget. $1,275 leftover. $1,275 is applied to Bank of America #2 ($4,325).

Month 32 – Minimum payments due $725. $2,000 budget. $1,275 leftover. $1,275 is applied to Bank of America #2 ($3,050).

Month 33 – Minimum payments due $725. $2,000 budget. $1,275 leftover. $1,275 is applied to Bank of America #2 ($1,775).

Month 34 – Minimum payments due $725. $2,000 budget. $1,275 leftover. $1,275 is applied to Bank of America #2 ($500).

Month 35 – Minimum payments due $725. $2,000 budget. $1,275 leftover. $500 is applied to Bank of America #2 ($0) and $775 is applied to Bank of America #1 ($7,225).

Since the Bank of America #2 has been paid off in its entirety we can subtract that minimum payment ($175) from our monthly liabilities and see that we’ve arrived at a new monthly liability of $550.

The only two payments left are the loan and the Bank of America #1 account.

Month 36 – Minimum payments due $550. $2,000 budget. $1,450 leftover. $1,450 is applied to Bank of America #1 ($5,775).

After Month 36 the Sofi Personal Loan becomes completely paid off and so we can allocate another $350 towards the Bank of America #1 account.

Month 37 – Since there is only one account left we’ll use the entire $2,000 to eliminate the balance. Bank of America balance becomes $3,775.

Month 38 – Leftover balance on the Bank of America #1 is $1,775.

Month 39 – All debt accounts are completely paid off and done!

All in all, it took approximately $77,775 to pay down $50,000 in credit card debt with this method and we were able to completely eliminate all debts within 39 months.

As seen by this example debt isn’t cheap to pay off and even in this accelerated payoff scenario it took an extra $27,775 in interest payments to eliminate the $50,000 in credit card debt.

We also didn’t add any variables like slip ups and additional charges to the credit cards –which occur very easily for most consumers. Due to the nature of conventional billing and reoccurring monthly subscriptions it’s very easy to get caught up in this reoccurring cycle of carelessly charing to your credit card.

This is why it’s important to always try and implement a good strategy from the get go and try to stick to it whenever possible. The more we strive in our goals eventually something has to stick and good with naturally come from it.

All in all, the debt snowball method is an effective and relatively straightforward way to get out of debt and pay down all your debts using the resources available at your disposal. The great about this option is it doesn't require you to borrow money from a bank or apply for other loans or options that just kick the bucket forward. This is truly a Do-It-Yourself method that helps you get out of debt within a reasonable time frame for those with strong willpower.

It also has other associated positive benefits like helping consumers improve their credit scores quicker than a lot of other methods since as each account balance goes to zero so does the utilization rate of said account.

It's the method that provides the most psychological rewards as each account balance that goes to $0 will make you that much more inclined towards aggressively paying down other debts. Compared to other viable payoff options there's no debt payoff method that provides a better reward system and positive motivation. If you stick to your budget and remain conservative you can use the "snowball" as your weapon of choice to get debt out of your life for good.