The Debt Snowball Method

One way to achieve total financial independence is using what is called the debt snowball method. What does debt have to do with financial independence? Well, most people are in debt already. Many of them by tens of thousands of dollars. It goes to reason that most people that want to become financially independent, need to also find ways to kill off their debts.

This strategy will help you whether you get get another job, do a side hustle, or just keep doing what you are already doing.

snowball(Note: This method is not my design, it is actually something that financial advisor and TV personality Dave Ramsey suggests and created).

Basically, the debt snowball method is where you take all of your debts (minus your house mortgage if you have one) that you currently have and list them out in order from the smallest debt owed to the largest. Do not bother with the interest rates, that is not important for this exercise in forming new debt free habits.

The process is, all of your other debts you pay the minimum only on and then you fiercely pay off the smallest debt you have first. Do not bother with the interest rates right now. Why should you not bother with the interest rates?

Because the debt snowball method is all about quick wins. By paying off the first debt as fast as you can, you will get the high of achieving something. This feeling of achievement will carry you forward towards your other debts and help you actually stick with the plan. When you do pay off your smallest debt, take the amount you were paying on the card and roll it over onto the next debt plus the original minimum you were already paying on the slightly larger debt.

Keep doing this where eventually the minimum payments for everything are rolled into one massive payment for your biggest debt.

This strategy can work wonders in making your debt disappear. Because you are not spreading your efforts across multiple cards, your efforts are not being diluted or watered down. Instead, you are doing what Dave Ramsey says is one of the only strategies that have been proven to work over and over again:

Fierce, focused intensity.

You can break down the smallest debt once you know how much you can pay every month into the number of payments you have total. For example, if I had a debt of a $1,000 and I knew I could pay a $100 towards it a month, I would have 10 debt payments.

I would keep these payments somewhere visible, like on a bathroom mirror or somewhere in my room so when I wake up and go to sleep I see that goal. Every payment, I would hang up the payment on the wall or mark it off so I can visibly see my progression towards achieving this goal.

In time, this method is so powerful because you will be absolutely crushing your debt. This is the first step to really becoming financially independent.

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