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What is the Snowball Method to Paying Down Debt?

By Rubina Ahmed-Haq on May 29, 2019 No Comments
Debt snowball plan under magnifying glass

In a report by the Bank of Canada, called Canada’s Economy and Household Debt: How Big Is the Problem?, it seems the problem is pretty big. Canadian household debt has been rising steadily for about 30 years. At the end of 2018 the Bank says, Canadians owed just over $2 trillion. One third is mortgage debt, but the rest includes debts such as student loans, car loans, credit card debt and line of credit debt.

When it comes to paying down debt, getting started can sometimes be the hardest part. Just like when we first start working out, getting to the gym is the most difficult. But, once you’re there, it’s easy to be inspired by others and to pick up that weight or get on the treadmill.

The same goes for your debt. Many of us don’t even know where to start when it comes to paying our debts off. Especially if we have debt from several sources.

If you are someone that needs to see immediate results in your efforts, then the best way to tackle debt for you could be the ‘Snowball Method.’ This method promotes the idea of paying down debt from your smallest loan to your largest.

Unlike the ‘Avalanche Method,’ described in another post, the snowball method gives us instant gratification. It isn’t the cheapest way to pay debt down, but it’s the easiest way to stay motivated.

Getting the snowball method started

If you decide to use the snowball method to pay down debt, start by listing your debts from smallest to largest. The first entry could be a utility bill that is overdue, a small amount you borrowed from your line of credit or money you owe a friend. It most likely will not be your mortgage. Here it is a step by step.

List your debts from smallest to largest.

  • Make minimum payments on all your debts except the smallest.
  • Pay as much as possible on your smallest debt.
  • Repeat until each debt is paid in full.

Here is an example a typical list of debts you may have:

  • Overdue hydro bill $98
  • Unsecured line of credit $235
  • Visa credit card balance $350
  • Loan from mom and dad to fix car $876
  • Student loan $3678
  • Car loan $8345

You would start with the overdue hydro bill, then move to your unsecured line of credit debt and so forth.

Why the snowball method works

Just like striking items off our to-do list, striking items off our debt list makes us feel like we are getting things done. It keeps us motivated, too.  According to an analysis done in the Journal of Consumer Research and published in the Harvard Business Review, the snowball method is more effective, because these small wins are a bigger motivator than just paying debt down in order of most expensive.

This strategy is great for anyone who stays motivated by seeing instant results. Someone for example, who is dedicated to getting to the bottom of their to-do list every day. At the end of the day, the debt snowball may work for them. It taps into the same emotion we feel when finishing that to-do list. By crossing small loans off the list easily, we continue to be motivated to pay all the debt down.

Who is it not for?

Anyone who is focused on saving money should not use the snowball method. The avalanche method is a bigger money saver. But for some, staying motivated is the biggest hurdle. For anyone who likes instant results and staying motivated that way, this is the method for you.

Want to talk to a professional about saving money? Get in touch with a credit counsellor today.

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Rubina Ahmed-Haq


Rubina Ahmed-Haq is a Journalist and Personal Finance Expert. She is the go-to money expert in Canada for several media outlets. She regularly appears on CBC Radio, CBC News Network, CTV Your Morning and Global Toronto. She writes for Homes Publishing group, ratesupermarket.ca, debt.ca and has her own website www.alwayssavemoney.ca. Rubina began her career as a broadcast journalist in 1999. Since then she has covered everything from local news, foreign affairs, politics, sports and of course finance! As a business reporter she has worked for CP24 from the Toronto Stock Exchange and reported for BNN. Her work has also appeared in the Toronto Star and various other magazines. She has a Bachelor of Arts degree from York University and is an alumna of the Humber College post graduate journalism program and holds the CSC designation. Her goal is to help Canadians find easy ways to manage their own finances. Follow her on Twitter @alwayssavemoney.

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