The average American household faces a debt of $137,063. This can seem like an insurmountable amount of debt. If you don’t have a system of attack, then you could end up randomly paying money to all of them and making progress on none of them.

The snowballing method is just one of several methods financial experts talk about. But what does it mean, and how can you use it to become debt-free? Follow this guide and learn how, you too, can snowball your way to financial freedom.

What Is the Snowballing Method?

The snowballing method is a debt reduction strategy. You focus on paying off your debt in order from smallest to largest. This helps you gain momentum as you eliminate the smaller debts and roll those dedicated payments into the larger debts.

How to Implement the Snowballing Method

Start by creating a list of all of your debts from smallest to largest. Make the minimum payment on all of your debts except for the smallest one. On the smallest one, you’ll pay as much as you possibly can.

Do this until the smallest debt is paid off. Then roll the payments made to the smallest debt to the next smallest debt. Continue paying until the second debt is paid off.

Continue this system until you’ve paid off all of your debts.

How to Make Extra Payments

The first step is to look at your current budget. Trim out anything extra or luxury. Create extra cash by finding unnecessary expenditures in your budget.

If you’ve already trimmed the budget and you simply don’t have extra cash, then it’s time to bring in more. This means taking a second part-time job or finding a side hustle. Use this extra paycheck to go solely toward paying off debt.

Lower Your Interest Rates

There are a few things you can do to reduce your debt while you focus on paying off the smallest debt. Consider consolidating your higher interest rate loans into one. This will reduce their interest rate by combining them.

You can learn more about debt consolidation here.

Why Snowballing Works

This method works because it focuses on changing your money habits and not on complicated math. By starting with the smallest debt, you achieve pay off success faster, which will encourage you to keep going.

If you start with the largest debt, it will take longer, and you’re at higher risk of giving up before you pay anything off. With snowballing, you have a large chunk of cash available for monthly payments on the largest debt.

This enables you to see real progress on the large debt. Plus, by the time you get to the largest, you’ve already paid off all of the smaller ones.

Start Snowballing Today

If you have several debts that total to a head-spinning amount, then it’s time to get serious about paying it off. The snowballing method is one strategy that can help you systematically chip away at the debt.

Read more articles in our financial section for more advice on getting financially independent.