‘Fall’ out of debt using the Snowball Method

Repaying smallest debt first, then moving on to the next one can build motivation and momentum

Often asked about the best method for repaying debts, many find the Snowball Method offers motivation from seeing smaller success accumulate, says Leah Drewcock, senior vice-president, MNP Ltd.

Fall is in the air; the weather is starting to get colder and the next thing we know we’ll be throwing snowballs again.

Along with winter will come holiday shopping and increased heating bills. Winter may not be a welcome change for many Canadians who are still trying to recover from the debts they’ve acquired during COVID. For those of us in the Insolvency field, we are often asked what the best method is for repaying debts. The thought of winter and debt brings to mind the Snowball Method of debt repayment.

SNOWBALL METHOD*

The snowball method of debt repayment is essentially paying the smallest debts first to build momentum towards paying all debts in full. Here are basic steps to the snowball method of debt repayment:

1. Before you set a repayment plan you first need to look closely at your budget.

  • What is your net monthly income?
  • What are your average monthly expenses?

Many people are already tracking their income and expenses on a monthly basis, but it is also important to allow for irregular or annual expenses by averaging them over a year to get an estimated monthly cost.

We recommend including savings as an expense item, to allow for yearly and unexpected expenses like vehicle repairs or annual dental appointments. Having funds available for when an emergency comes up or for an expense that isn’t there every month, will help you stay on track with your repayment plan.

If you need help figuring out your income and expenses you can check out the MNP Budget Tracker Spreadsheet to get some assistance in preparing your budget.

2. Make a list of your debts, from smallest to biggest balance owing

  • Who do you owe (the creditor)?
  • How much to you owe?

Now that you have the details of your budget and have summarized your debts you’re ready to work on your plan to “Fall out of Debt.

3. Every month:

  • Pay your living expenses, put the budgeted amount in savings, and continue to make minimum payments on all your debts, except the debt with the smallest balance!
  • Put the remaining balance in your budget towards paying down the smallest debt.
  • Rinse and repeat – keep paying the smallest debt until it is paid in full, then move on to the next smallest debt and so on until all your debts are paid in full.

As the snowball (debt repayment) gains momentum downhill you’ll feel the positive energy that comes from seeing the results (your debt volume is shrinking)!

4. Check-in:

It is important to check in with your plan. If your snowball isn’t gaining momentum and the debt repayment plan isn’t working for you, it is important to recognize that you’re struggling and there are other ways to get your finances back on track.

You are not alone, there are professionals who can help. Many people have found relief through MNP Ltd. – Licensed Insolvency Trustees who will take the time to understand your current situation and provide personalized solutions to meet your exact needs.

*A study at the Boston University found this method has a great success rate. It may not make sense from a financial point of view, but the psychology of small wins helps build the momentum, motivation and consistency required to keep moving forward.

Finances

Just Posted

A police officer speaks to a driver during last year’s Shift Into Winter event in Quesnel. The annual road check reminds drivers to slow down and be safe during winter. (Karen Powell Photo - Quesnel Cariboo Observer)
It’s time to Shift into Winter

The annual campaign offers winter driving tips

Jeff Malin nears the finish line Sunday, Oct. 11 in downtown Quesnel. (Lindsay Chung Photo - Quesnel Cariboo Observer)
No travel, no problem: Jeff Malin completes ninth marathon in Quesnel

The Quesnel firefighter has been running marathons since 2012

The owners of Motherlode Wash on Juniper Road in South Quesnel are hoping to construct a new wash building that would accommodate larger vehicles like RVs and semi-trucks. The new building would be two storeys and would match the existing buildings on the property. (Lindsay Chung Photo - Quesnel Cariboo Observer)
South Quesnel’s Motherlode Wash applies to add wash building for large vehicles

The new building will include three large-vehicle wash bays and one touchless wash tunnel

Sherry Jasper and Juerg Feldmann show off their third-place trophies from an outdoor Quesnel Pickleball Club tournament earlier this year. (Cassidy Dankochik Photo - Quesnel Cariboo Observer)
Quesnel pickleball going back in the jar

The indoor season will kick off with strict COVID-19 prevention guidelines

Portrait of Dr. William Allen Jones - screen print with gold ink - (c) Bill Horne. (Photo Submitted)
Wells artist prints portrait of B.C.’s first dentist

Bill Horne hand-silk screened the portrait with 11 colours in an edition of just 54 as a fundraiser

In this photo provided by Shannon Kiss, smoke from the CalWood Fire billows, Sunday, Oct. 18, 2020, as seen from Gunbarrel, Colo. (Shannon Kiss via AP)
‘First guys out:’ western Canadian air tanker fleet busy despite drop in wildfires

CEO believes wildfires have become more dangerous in recent years as people live closer to where they start

(Black Press Media files)
B.C. suburbs could see increased demand for rental units as people work from home

Vancouver’s average monthly rent is the highest out of 35 cities across Canada

Fort St. John councillor Trevor Bolin (B.C. Conservative Party)
BC Conservatives leader fights back after BC Liberals leak 2018 workplace harassment case

Sexual harassment case was connected to employee being terminated, WorkSafeBC found

The BC Ferries vessel the Queen of Oak Bay. (News Bulletin file photo)
‘Buy a boat,’ Horgan advises anti-maskers on BC Ferries

NDP leader John Horgan talks COVID-19 misinformation

Canadian and American flags fly near the Ambassador Bridge at the Canada-USA border crossing in Windsor, Ont. on Saturday, March 21, 2020. Restrictions on non-essential travel between Canada and the United States are being extended until at least Nov. 21. THE CANADIAN PRESS/Rob Gurdebeke
Non-essential travel restrictions at Canada-U.S. border extended to at least Nov. 21

The restrictions do not apply to those providing essential services in either country

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Jordan Naterer, 25, was last seen Saturday Oct. 10. He planned a hike in the Manning Park area, and has not been seen since. Photo Facebook.
Family devastated as search for missing Manning Park hiker suspended

‘It was an extremely difficult meeting with the parents when we had to tell them.’

FILE - Nathan Cullen speaks to media in Smithers, B.C., Friday, February 28, 2020. THE CANADIAN PRESS/Jonathan Hayward
Horgan, Cullen apologize for NDP candidate’s comments about Haida candidate

Nathan Cullen had made insensitive comments about Roy Jones Jr. Cheexial

Six Mile Beach outside Nelson is known for its perfect sand, clear water and unique sand spit. But the drowning death of a man in July has residents asking if the dangerous spot has become too popular. Photo: David Grantham/Kootenay Drone Services
Dangerous oasis: The fatal history of a popular Kootenay Lake beach

Six Mile Beach near Nelson is known for its unique sand spit. But locals have feared it for decades

Most Read