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Snowball Payments to Get Out of Debt

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Years ago, a good friend of mine and I were discussing finances. I was a newly single mom, and was feeling overwhelmed by the prospect of trying to pay my bills. My friend told me how she handled those bills that are payments (not regular monthly bills, but things like furniture payments, car fixits, medical bills, car payments, etc.). By organizing and paying them as follows, you will be surprised how quickly they can be paid off!


First of all, figure out your budget. How much is each payment? List the debts in order from smallest to largest. Make payments to each, EVERY month. List the following information:

  • Pay to:
  • Balance owing:
  • Payment:
  • New balance:

Do this for each bill.

  1. Make the largest possible payment to the first bill (which has the lowest balance), as well as the normal payments for the rest of the bills. As soon as that first bill is paid off, draw a line through it and mark it as paid. Psychologically, that is a real boost to see the progress you're making.

  2. Now apply THAT payment to the next bill on the list, in addition to the regular payment. (Example: If you are making $25 payments on each of five bills, and you just paid off the bill at the top of the list, now apply THAT $25 payment to the second bill. Now the bill at the top of the list (in this case, No. 2), is now getting $50 per month, and the rest are still getting $25). Because the payment is currently double, obviously that bill will get paid off more quickly, and you can cross that one off.

  3. Repeat this pattern down the list, now that two are paid off, the next bill payment for Bill Number 3 is $75. By being disciplined in paying the bills in this fashion, you will be surprised how quickly you can knock off these bills and how much faster your stress level drops!

By paying the bills in this way, when one is paid off, you can make progress very quickly on the list of bills, without changing your budget/spending. It's very easy when a bill is paid off, to simply incorporate that money into the spending. By exercising discipline in paying the bills off in this way, when you get all the bills paid off, you can now put the money into savings, which was previously spent on these "one-time bills!

I hope this system of bill paying helps others who are struggling with finances! I have found that most people are good about working with a person if they receive regular payments. This way, everyone gets a little something, and the top bill on the list gets the most. By the time you get to the bottom of the list, you can make a hefty payment instead of the $25 (or whatever) you previously were able to make! Good luck!


Source: Another single mom struggling to make ends meet!

By Bzladi from Storm Lake, IA

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March 20, 20100 found this helpful

This is a really great idea, and I can see how bills would get paid off much faster. Excellent.

Leah, Queensland, Australia.

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March 23, 20100 found this helpful

This is a great idea, but it only works if you stop spending money on things you don't need and running up other bills that end up at the bottom of the list. Thanks for the tip, hope people take your advice.

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March 24, 20100 found this helpful

Michelle, You are exactly right. One needs to exercise discipline in not running up MORE debt while digging out of debt!! Have to use common sense! I also found that paying by cash and money order while things were so tight was helpful. No credit card or checkbook during that time of my life! No way for me to spend money I didn't have. When it was gone, it was gone! Have to really figure out "wants" vs. "needs"! Pam (Bzladi)

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March 28, 20100 found this helpful

That's a good plan. It would also help motivate a person not to run up more bills, since they know they'd have to add them to the bottom of the list and watch some of their progress disappear. And it's a great help in motivating someone to take money that they might have spent on something else and apply it to an old bill, since they can actually see progress being made.

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April 4, 20100 found this helpful

I just started doing something similar. Great idea here. So I'll give you a big thumbs up for this tip.

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June 25, 20120 found this helpful

Excellent plan! Thanks for sharing!

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June 25, 20120 found this helpful

They so got this from Dave Ramsey.

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June 25, 20120 found this helpful

I also used this method 20 years ago to get out of debt. I still use a credit card but I pay the balance in full each month so I don't incur a finance charge. One additional item to consider is putting the bills in order by the size of the interest rate. If you start paying off the highest interest rate bills first you will be saving more money in the long run.

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June 27, 20120 found this helpful

This is what Dave Ramsey teaches. I think he deserves the credit, and he would say that God deserves the credit.

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