Real talk: There’s no quick fix for getting out of debt. For most consumers, it’s an ever-present expense that they factor into every financial decision. In 2022, average consumers in South Africa need to spend around 63% of their take-home pay to service their debt.

However, getting out of debt can feel even more dragged out and overwhelming without the right strategy. Luckily, you don’t have to wing it when paying off your debt (for good).

Here’s everything you need to know about Dave Ramsey’s Snowball method and how it can help you pay off your debt more efficiently.

What is the snowball method? 

Although Saffas aren’t too familiar with snowballs, the concept is still pretty straightforward, but let’s set the scene anyway.

Every snowball starts out small. However, as it gains speed and momentum, it grows in size and becomes a force to be reckoned with. What does this have to do with paying off your debt? Everything.

Ramsey’s Snowball Method, a debt-reduction strategy, follows an approach where you pay off your debts systematically, from smallest to largest. Then, as you start knocking down your smallest debt, you roll over that minimum payment towards your next debt. This means the extra cash you have from paying off your smallest debt goes to paying off the next. Then, continue the cycle until you can start paying off the largest debt through more significant monthly instalments.

Okay, Ramsey, we see you. But how would it work when your other debts demand attention?

Why does the Snowball Method work?

The Snowball method amplifies motivation toward paying off debts by changing habits and behaviour. Celebrating smaller victories makes you more likely to continue consistently paying off your other debts. However, there’s also more to the method than sheer willpower.

By focusing on the smaller debts first and only paying the minimum amounts on others, you can speed up the process and give those pesky interest rates a run for their money. Eliminating the smaller debts and getting them out of your life for good allows you to shift all your attention to the more significant debts and pay larger lump sums in a shorter period.

The Snowball Method in 5 Steps

Keen to get going and start implementing the Snowball Method? Here’s how Ramsey recommends you get started:

Step 1: Arrange your debt from the smallest to the largest amount.

Step 2: Keep making minimum payments to all your debts except the smallest.

Step 3: Pay as much as you can towards the smallest debt.

Step 4: Once paid off, roll over that amount towards your next debt.

Step 5: Repeat

By following these steps, you can prioritise your efforts and reduce stress, knowing that you’re systematically paying off your smaller debts to gain momentum and speed for the larger ones looming.

Where’s the catch, Dave? 

As we mentioned before, there’s no get-out-of-debt-free card. The Snowball Method, if done correctly, can have a massive impact on reducing your debt. However, it’s only as effective as how disciplined you are with the approach. As you pay off more debts, using the extra income towards something else may be tempting instead of using it to increase your following debt payments. This is where each person needs to show self-discipline and consistency. Luckily, you have SPOT to cheer you on.

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