Things You'll Need:
- Account statements
- List of other monthly bills and expenses
- Monthly income
- Paper
- Pen/pencil
- Checkbook or cash
- Optional:
- Calculator
- Computer
- Spreadsheet or Accounting Software
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Step 1
Create a list of your total debts, including the current payoff, minimum payments and interest rates.
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Step 2
Sort your list using one of these methods: rank your debts from smallest payoff amount to largest payoff amount or rank them from highest interest rate to smallest interest rate.
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Step 3
Add the minimum debt payments, and include other bills such as utility bills, gasoline, food, etc. This is your total monthly expenses.
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Step 4
Subtract your total monthly expenses from your total take-home pay. The amount that is left over is the money you have to pay off extra debt, call it your debt snowball. For example, your bills total $2,000 and your total take home pay is $2,200, thus your beginning debt snowball is $200.
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Step 1
Begin with the first debt and pay the minimum payment, plus your debt snowball. For example, if the bill at the top of your list is a credit card with a $20 minimum payment, your monthly payment on this bill would be $220. Pay just the minimum payment on the other debts.
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Step 2
Mark the debt off your list when you pay it completely off, then apply the debt snowball plus the previous bill's minimum payment to the second debt on the list. For example, if you paid off a credit card with a minimum payment of $20 per month, you would add that $20 to your starting debt snowball of $200. Your debt snowball would then be $220. Pay this amount on the second debt, plus the minimum payment each month.
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Step 3
When the second debt is paid off, add the minimum payment into the debt snowball and begin paying off the third debt.
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Step 4
Continue in this manner until all of your debts are paid off. Congratulations, you will be debt free!
