Getting out from under your debt with the snowball method

This is a guest post and entry in our non-fiction writing contest by Jason S

Being new to the prepping world and a recent graduate I am finding it a unique challenge to balance paying my bills and prepping for different types of scenarios. Adding to this challenge is the need to get my girlfriend on board with prepping and the best way I can do that is by removing the stress of debt. As such I have started a pay down method that will help eliminate some of my bills (credit cards, student loans, etc…) while gathering supplies.

There are multiple methods that we can use to pay down our debts, some more extreme than others; the methods I am going to talk about are the Snowball method and the Avalanche method.

The Setup

Both of these methods requires you to lay out the amounts of your debt, the interest rates (if any), the minimum monthly payment, and the amount of money you can safely pay each month. Once we have gathered this information we need to do some calculations. (Don’t worry you can download a free spreadsheet from here ( to handle all the calculations and scheduling for you. You just need to fill them in properly.)

The first calculation is to add the total minimum monthly payments in order to find out exactly how much you are paying out each month at the minimum.

We then take the total monthly minimum payments and subtract the amount we can safely pay each month. Ideally there will be some amount remaining. If so this amount is called our initial snowball amount, and unlike fighting with snowballs the bigger the better, which is the bonus amount that will be used to pay extra on the debts.

Snowball Fight!

Once we have the snowball amount we will organize our debts in smallest to largest order. Each month our snowball will be applied to the smallest debt first. Once that debt has been paid off our snowball will grow by that debts monthly payment making the amount applied to the next debt larger.

The more you pay off the larger your snowball, just like a snowball rolling downhill!

Snowball Example:

Name:     Balance  Interest   Rate   Monthly Payment

Credit Card 1       $1,000.00  24.0%  $50.00

Credit Card 2     $6,000.00   16.0%   $75.00

Credit Card 3 (really?)   $10,000.00  12.0%  $220.00

Car Loan $20,000.00 8.0% $320.00

Bank Loan $22,000.00 4.00% $400.00

Total: $59,000.00 Total: $1,060.00

We can pay $1,300.00 a month. 1300 – 1060 = $235.00.

Our snowball is $235.00 a month. This means our monthly payment to Credit Card 1 would be $285.00 (235.00 + 50.00) a month. You can pay this debt off in around 5 or 6 months using this method.

Once Credit Card 1 is paid off our snowball will stay at $285.00 making Credit Card 2’s next payment after Credit Card 1 is paid off $360.00 (the $285 snowball + the $75.00 monthly payment).


The Avalanche method has you arrange your debts from largest to smallest. This type of arrangement has you paying on your largest debt first with your snowball and monthly payment instead of the smallest debts. This method takes longer pay off debts but once you pay off your first debt the snowball jumps in size fairly quickly. The larger increases continue faster and faster, like an avalanche, the further down the list you go.

Avalanche Example:

Name: Balance Interest Rate Monthly Payment

Bank Loan $22,000.00 4.0% $400.00

Car Loan $20,000.00 8.0% $320.00

Credit Card 3 (really?) $10,000.00 12.0% $220.00

Credit Card 2 $6,000.00 16.0% $75.00

Credit Card 1 $1,000.00 24.00% $50.00

Total: $59,000.00 Total: $1,060.00

We can pay $1,300.00 a month. 1300 – 1060 = $235.00.

Our snowball is $235.00 a month. This means our monthly payment to Bank Loan would be $635.00 (235.00 + 400.00) a month. You can pay this debt off in around 36 or so months using this method, as opposed to the 55+ months it would be without the snowball.

Once Bank Loan is paid off our snowball will raise to $635.00 making Car Loan’s next payment after Bank Loan is paid off $955.00 (the $635 snowball + the $320.00 monthly payment).

As you can see the increase in the snowball is much larger in the avalanche method than the in the snowball method, but it takes much longer for the initial increases to occur.

Snow fall!

Often times we get some extra cash, especially around tax time, which we may want to apply to our debts. These extra amounts are called snowflakes. Snowflakes will be lump sums that are added to the snowball for the month of your choosing. This will shorten the length of your debts and make life a little nicer in the long run.

Final Thoughts

Both pay down plans help to quickly pay down debt, especially if you can afford to let a little snow fall every now and then, in a scheduled manor that will allow you to not only pay your debts but also see when you will escape from under those debts.

Personally, I prefer the snowball method because it pays off small debts faster which feels better and frees up credit in case of financial emergencies. On that note for any pay down method to work you have to stop adding to the debt!

This is an entry in our non-fiction writing contest where you could win:

First Prize) Winner will receive a Stealth Body Armor Level II vest courtesy of SafeGuard ARMOR™ LLC and a $150 gift certificate for Wolf Ammo courtesy of   A total prize value of over $600.

Second Prize) Winner will receive a Wise Essentials Kit courtesy of LPC Survival and an EcoZoom’s Versa Stove courtesy of EcoZoom stoves.. A value of over $300.

Third Prize) Winner will receive copies of both of my books “31 Days to Survival: A Complete Plan for Emergency Preparedness” and “Dirt-Cheap Survival Retreat: One Man’s Solution”  and a Katadyn Siphon Water Filter courtesy of Mayflower Trading Company.  A total prize value of $107.

Contest ends on June 5 2012.

About M.D. Creekmore

M.D. Creekmore is the owner and editor of He is the author of four prepper related books and is regarded as one of the nations top survival and emergency preparedness experts. Read more about him here.


  1. Great article on an important topic for everyone. As a preparedness exercise, I once listed every crisis situation I could think of (a few dozen of them) along with what preparations would be required to deal with each situation. For a surprising number, being financially stable with some savings in the bank was the best way to be prepared. Getting out of debt is one of the first steps to being financially prepped. If I might make a few suggestions:

    1. Getting out of debt is half the battle. The other half is staying out of debt. If you have the discipline to pay off your balance every month, then having a credit card can be a good thing. If you find yourself routinely carrying a balance, get rid of your cards. Don’t let them be a temptation.

    2. Out of the two methods presented, I would strongly suggest the snowball method. A big part of getting debt free is maintaining the mental drive to do it. With the snowball (smallest to largest), you should start to pay off balances within a few months. With the avalanche (largest to smallest), it may be years before you pay off that first balance. The first method gets you victories early on which motivate you to keep going.

    3. Also look at interest rates on your debt. That’s how much money it’s costing you to have that debt. For example, if you have a credit card at 18% APR, they’re charging you $180 per year for every $1,000 of debt. Another account at 4% APR is only costing you $40 per $1,000 per year. In this case, if you have $1,000 to pay off debt, you’d save yourself $140 by applying it to the higher interest rate.

    For this reason, you might consider ordering your debts from highest interest rate to lowest and paying them off in that order. You might also consider transferring the balance on a high rate card to a lower rate card and then paying it off.

    Happy prepping…

    • Excellent suggestion on ordering it by interest rate or trying to transfer things to lower interest cards! That simple act can save you big.

  2. Why would anyone willingly take on so much debt to begin with?

    • I can tell you from my perspective at least.

      When I bought my property, it was bank owned and a had been a rental for the past 15 years. But the price was really good, even after needed repairs were factored in. It needed about $20,000 in repairs, which I did on credit cards, opening 2 home depot cards and putting some of the bigger purchases (like the new roof) onto my discover card. I figured I’d just refinance and put the balances from the cards back into the house which the debt was for anyway.

      THEN, I lost my job and the market crashed. Thank God for unemployment, but it was not enough to pay everything at the rate I had been paying, and so I had to ask creditors for payment programs, and a few bills were paid late from time to time. It will now take me several years to rebuild my formerly fantastic credit.

      I know I probably should have just filed bankruptcy, but my integrity would not allow me to do it – I had, after all borrowed the money, and the creditors loaned it to me in good faith.

      That’s one way someone could take on so much debt.

      • With all respect, wouldn’t it be better to do repairs as you saved up enough $ to do each one ?

    • Jennifer (Prepping Wife) says:

      Because not everyone is as cool and level headed and perfect as you are. (Sorry – your comment made me mad.)

  3. Jason:
    You just summed up 13 weeks of Dave Ramsey’s Financial Peace University program. I am the instructor at our church and we offer it twice a year. Because of the tools he gives you it’s well worth the cost of about $100 for materials (that’s the only cost).

    I do get a kick out of people who complain that there is a $100 cost, yet they pay out thousands of dollars in interest each month (I was paying $2,200 when I decided to get help).

    Thanks for the info. Being debt free is one of the best parts of prepping. With no debt you can get by for longer in a sever economic downturn before things get critical.

    • My wife and I took Dave Ramsey’s Financial Peace University soon after getting married and I consider it one of the smartest things we’ve ever done from both a financial and a relationship perspective. The information we learned about debt, saving, investing, shopping, insurance, real estate, etc. has probably saved us thousands since then. It also put us on the same page financially early on in our marriage, which undoubtedly has prevented countless arguments and headaches in our marriage.

      I highly recommend it.

      • new prepper says:

        Have also used Dave Ramsey’s program..One of the best things i have done..still using it

  4. robert in mid michigan says:

    i followed the snowball effect and it has been a huge relief being close to being out of debt. i followed dave ramseys free snowball program and it has worked for us. i have one credit card that we pay off monthly and the house, which is up in the air now no idea how that is going to work.

    my advice is to follow the snowball and even if you can only afford to spend an additional 20 a month it will make a differance. one of the things we did was after we paid off each bill we would take half of the monthly payment for one month and splurge with it. a one hundred dollar bill paid off allowed us to spend fifty on what ever we wanted. go out to eat, buy her some cloths what have you. its a tangeable reward that allows you to enjoy the fact that you are paying off debt. towards the end we could spend a lot when we paid off a bill. spent a weekend at the hotel and ate out a couple times and even saw a movie. you have to enjoy life and by doing this you do not break from what you are doing and splurge adding to your debt.

    great idea stick to it and you may have an extra thousand a month to prep with or do what you want in the end. good luck and keep prepping.

  5. Jason,
    Some good advice. We’ve been out of debt for more than a decade, but I remember being right out of school (a long time ago) and having similar financial issues. There are additional methods to the ones you discuss, one being a synthesis of the two where you take into account the amount of interest being paid on an account each month, and attacking that payment first; however, the most important point in your entire post was your last statement, “. . . for any pay down method to work you have to stop adding to the debt”.

    You really don’t need that newest iPad or even prep tool. Save your money toward large purchases, and now a days, even cash in a shoe box doesn’t lose that much more to inflation than a savings account. Also look for stores that offer a lay away plan, where you can purchase an item at today’s prices and pay it off interest free before you take the item home.

  6. Thanks for all the comments all.

    Sue: Sometimes it’s not something you do willingly. College, health issues, etc… can add up quickly. Other times you can do it without realizing what is happening. This is especially true for kids just out of the nest who were not taught about money.

    JP: Really? That’s kind of cool. I know a lot of people who have gone to Dave Ramsey’s Financial Peace University and have turned their financial lives around. My mother taught me this application of compound interest (which is the most powerful tool in the financial world).

    Robert: That’s always the hope. Freedom from debt and extra scratch to make life safer!

    Ohio: Some excellent advice, if you don’t have to have it and you don’t have twice the amount the item costs in disposable income you may not need it. The lay-away plans are also a great idea. I am glad to see that option returning to many stores.

  7. Thanks for the methods of paying off debt. Nicely done!

    I saw the possibility I could lose my home 4 years ago with all the debts I acquired from losing my business. I didn’t have the income to pay anything off early. Necessity is the mother of invention. I am a low income household but managed to “cut my budget” to add $10,000 more than I was earning over three years to pay off my Credit Cards and second mortgage. I had to be very creative to do this and made it a game to see what worked. I had no additional income coming in to pay these debts.

    I cut my electric bill 65%
    I cut food expenses by 50%
    I cut my heating bill up in the cold north here by 65%
    I cut my car insurance by 50%
    I cut my long distance phone bill with a penny per minute plan by90%
    I cut my travel expenses but still went places.

    The good thing as a result I didn’t lose my home when I lost one of my jobs 4 months after paying it all off from an accident. I “Snowballed” my debts and the extra payments on them got higher and higher. Another good thing is I am still in the habit of the cuts above mentioned and got another job last month. It is going towards my savings and investments now instead of the debts.

  8. Wellrounded says:

    I’d like to add that saving a small emergency fund along side debt payments can help. It’s just too easy to redraw if something happens along the way. I made the mistake of putting every spare cent into a credit card payment, then everytime I had a cost that was above my usual budget I’d use a credit card to pay it. I was getting ahead but not breaking old habits.

  9. Jennifer (Prepping Wife) says:

    I do have to say that I like the snowball – I have been doing it for a few months. I owed my folks about $200.00 (down from 3 grand) from loans from my divorce. I have a total of $800.00 in credit card debt, $2000.00 left on my car (down from $7000.00) and $220.00 on our wedding loan (down from $5,000.00). I have been snowballing for awhile and will make my last payment to my folks this month which will give me an extra 200 which I plan to put towards the final payment on the wedding loan which will give me an extra $420.00 monthly which I will put towards the credit cards so I can pay that off in two months which will give me enough to pay off my car in 4 months. After that I will be debt free except for stuff on my credit report which I would like to have paid off even though it wont really help my credit. I’m pretty excited about it all right now. =)

  10. Donna: I am glad to hear you have dug your way out of debt! Congratulations!

    Wellrounded: I agree you can easily add the savings amount into your debt plan. You just give it a 0 interest and don’t add any money to the “payment amount” until the end of the budget.

    Jennifer: It’s wonderful to hear that the methods are working for you! As for your credit report it will vanish in time. I worked at a bankruptcy office for 7 years and I can tell you having bad things on your credit report isn’t the end of the world and the fact that you are paying it off shows creditors that you have become a responsible borrower.

    A fun fact about creditors, if you pay your payment on time all the time they consider you deadbeats because they aren’t making any extra money in fees from you.

    • Jason, You said “A fun fact about creditors, if you pay your payment on time all the time they consider you deadbeats because they aren’t making any extra money in fees from you.”

      I was told by one credit card company when I cancelled all the cards I had with them when all were paid off, that it would damage my credit. Obviously the lying threats Dave Ramsey speaks about is true.
      After that, I get over 20 Credit card offers a month from them and other companies. They now make good firestarter for my wood stove.


      FYI, the date due published on your bill in many cases is not the date due. In 20 years of paying credit card bills, one time it arrived on the due date, 2 pm when the mail arrived at their office. They considered the date due at 12 noon, 2 hours BEFORE the mail came that day and considered it “late”. This is intentional robbery. They don’t tell you this on your statements, so you have to call and ask.

      I paid the ridiculous late fee and paid them off immediately, and cancelled their 2 cards I had from them for my business. I did a 180 degree turn on credit cards. They make no money from me.

  11. jason…excellent article…

    in a nutshell…always pay more than the amount required to pay when due – no matter how small – by setting up extra payments automatically. And, to stop adding to the debt – this is definitely key.

    Credit cards are excellent when used correctly – which benefits us, and not the banks. When used incorrectly, the bank always benefits – it is as simple as that.

    So glad to hear about your plan to get out of debt.

    Without my ability to borrow I would not be in the position I am in today – it has served me well.

    However, was always aware I had to stay on course – and when I was sick it was tough meeting my mortgage payments when it was due…was not game to miss a payment…

    so I had to cut back on everything else – at one time mortgage interest rates were over 18% for months for ages – then hit 22% for a few months…not kidding – then finally dropped…decimated the building industry. So many people lost their homes…this was in 1988.

    I saw what was happening – thank goodness I was still nursing then and I only had a small mortgage – less than $20K. And I made sure I was rostered to work every weekend and public holidays – and weekend theatre call as well…as penalty rates were time and a half, or double time.

    Years later, when I would need white-goods for my properties – would get them so many months interest free e.g. 12, 18, 24 etc – before the interest period commenced.

    So I would work out my monthly payments so that the items were paid off in full months in advance of when the interest rates would kick in…and in the ensuing months, the tenant’s enjoyed new stoves, refrigerators etc…and I received good rents – did this for many years – and not 1 cent of interest.

    And I am one of those ‘deadbeats’ – always pay off my credit card in full each month – credit card is used for tax deductible expenses on my rentals – but don’t go thinking I’m rich…money comes in, and it goes out too…as regular as the tides.

    The thought of paying 20% interest on consumer debt is too scary to even think about…so when I buy my stuff from thrift shops, or stuff on mark down at clearance sales, I know that the money I am spending is not going to be an interest bearing debt…I use coins for my personal spending.

    To go into debt at my age is not good, because when I eventually fall off my perch my DD will have that burden…so, good on you for getting the message out on how to reduce debt.

    How many of our parents managed to raise children without going into debt…it can be done…and can see you are on your way….

    I also concur with wellrounded….good idea to have a stash of emergency cash…if you know the washing machine is going to conk out soon, because it may be coming to the end of its useful life…
    then start putting coins away, pretend you are paying $3 per load at the laundramat, and put that $3 away each load…will be amazed at how quickly you will have the money to pay cash for a new w/machine when it eventually wears out.

    Fridges, washing machines and stoves – can get 10 years out of them usually. Imagine the accumulated coins saved for these items from the 7 year mark to until they finally stop working…


  12. Encourager says:

    Great article. Thanks! One thing we have done that has helped us is to add up all the 2xyear or 1xyear expenses such as property taxes, house insurance, car insurance, etc. Then we divide that total by 12 and put that amount into a savings account each month. That way, it is no shock to pay a $900 house insurance payment because the money is sitting in the savings account. Eventually you will have extra money in the savings account because not everything is due all at once. So we have an emergency cushion built in to the plan. If you have unexpected expenses, you are covered.
    We paid off the mortgage when my husband retired with his retirement incentive. Other than a loan for a trailer we bought so we could travel and one other small loan, we are completely debt free. There would be no way we could buy preps otherwise. I am working on paying off those two loans, one is interest free so I will pay it off last.

    • Its a great idea to put a little away for annual expenses. If you put it in the correct type of savings account you can actually make money off that savings as you wait for the bill. I have a high yield savings account with ing direct that returns 1% or something crazy low (thanks fed). So the money works for me while I wait for the bills to come.

      As a bonus with each penny put in by the bank you gain interest not only on the original amount but the amount the bank pays you (this is called compound interest). Basically you make money for keeping your money with that bank.

  13. Love all the comments. It’s easy to get into debt if you don’t stop to think of the burden it will be later. A lot of families don’t teach their kids about money–it’s taught even less than sex!! One family we know opened a savings account for their child when she was 5. In her name with a passbook that she could enter deposits and interest in. She learned about “free money” otherwise known as interest. She was also informed before long about interest charged. Needless to say she has been a saver all her life. Bought a house in her 20s (apparently with a large down payment). We suspect her kids are also being taught the same lessons. Too bad the interest is so low as to not be quite as inspiring!

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