Snowball your debt repayments


If you’ve cultivated debt across multiple creditors, such as credit cards and ‘buy now, pay later’ services, the thought of even chipping at this debt can be daunting. If you don’t know where to start, you aren’t alone. Afterpay has roughly 3.4 million active customers in Australia, Zip and Humm have about 2.5 million each and 13.7 million Australians currently have a credit card. There are positives and negatives with using credit services, and we are neither condoning nor encouraging using them, however if you are struggling to get out of debt then you could try the snowball method.

What is the debt snowball method?

The snowball method can assist you to pay off your debt by amount. If you can imagine a physical snowball rolling, the snow accumulates, making the ball bigger and bigger. In the same fashion, paying off your debt with a snowball method means the amount you pay towards each of your separate debt accumulates, gaining momentum as you knock out each balance and paying debt off faster.

Why does it work?

The snowball method uses behaviour modification. When you stick to your routine and you reach a point where you’re paying back the larger debts you’ve accumulated, you end up with a debt snowball. Suddenly, you’re funnelling hundreds a month toward your debt, rather than chipping away at them with minimum payments, resulting in a faster resolution.

How do you do it?

  1. Focus on the smallest balance first.

Focus on paying as much as you can toward this debt balance whilst simultaneously paying the minimum payment that’s required for your larger debts. Once you complete your payments for this small balance, apply this exact payment you’ve been making to the next smallest balance, and so on and so forth. If you keep going in this direction, you’ll slowly build the snowball up and pay against your largest debt until it’s completely paid off.

  1. Use a worksheet or list

To prioritise your debt and work out what requires immediate attention, use a worksheet, or compose a list to refine your payoff plan. Use this list to both order your debt by the smallest balance to the largest and to continually mark your progress to keep you motivated and goal orientated.

To make it more detailed, list the payment date priority, the name of the debt, the allocated interest rate, and the minimum monthly payment.

  1. Once you’re out, stay out

After your snowball efforts free you, the last thing you want to do is accumulate more debt and have to repeat the process. Use our three tips below to keep yourself in a healthy debt, where you aren’t stuck or constantly scrambling to make payments.

  1. Don’t overspend (all the time) – It’s unrealistic to expect to never have to use credit again especially if the unexpected occurs, an emergency surfaces or a large purchase is required. Using credit cards often comes down to the individual’s self-restraint and the issue is that they make spending outside your means too easy. If you’re going to use a credit service, make sure you take into consideration the context of a budget.
  2. Ask yourself “is this a want or a need?” – One key to controlling erratic spending is to not desire “stuff” that’s not essential. Perhaps you’re seeking the latest iPhone when your current phone suffices, or you’re purchasing clothes every time you have an event even though your wardrobe at home is overflowing. These items won’t make a vast difference in your life, however the debt from overspending will. Learn to align what you spend your money on with your values and consumption will naturally decrease. Although you don’t have to imprison your money and never splurge on anything that makes you happy ever again, but when you have debt to tackle, your funds should be prioritised there.
  3. Be accountable and responsible – be vulnerable with a friend, partner or family member and tell them your desire to eliminate debt and be a more responsible spender. They can either join you on your goal or work to keep you committed and accountable until you reach your targets by reminding you whenever you start to stray.


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