‘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.

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

The Nisga’a Valley Health Authority reported an isolated cluster of COVID-19 cases among non-direct care staff at the New Aiyansh Health Centre. (Gary Fiegehen/Nisga’a Lisims Government)
New Aiyansh Health Centre experiencing COVID-19 cluster among non-direct care staff

Nisga’a Valley Health Authority asking residents to cancel appointments outside the Nass Valley

A photo of the CervixCheck at-home test kit, developed by Eve Medical. (Submitted Photo/Katina Pollard, Métis Nation British Columbia)
Pilot project puts cancer screening into the hands of northwest B.C. women

Métis women experience barriers to cervical cancer screening

Brett Alexander Jones is wanted on several warrants province-wide, in connection with multiple charges. Jan. 21, 2021. Kitimat RCMP photo
Kitimat RCMP searching for man wanted on several warrants province-wide

Jones is described as a five-foot 10-inches Caucasian man, with blond hair and blue eyes.

The Nisga’a Lisims Government has extended its state of local emergency. (File photo)
Nisga’a state of local emergency extended, vaccines delayed

There are 21 active COVID-19 cases in the Nisga’a Valley Health Authority

Businesses continue to struggle under COVID-19 restrictions as the pandemic reaches the one-year mark. (B.C. government)
Another 564 COVID-19 cases, mass vaccine plan coming Friday

15 more deaths, community cluster declared in Williams Lake

A specialized RCMP team is investigating a suspicious trailer, which might have connections to the illicit drug trade, found abandoned outside a Cache Creek motel. (Photo credit: <em>Journal</em> files)
Police probe U-Haul trailer linked to illicit drugs left outside Cache Creek motel

Hazardous materials found inside believed to be consistent with the production of illicit drugs

Premier John Horgan leaves the podium following his first press conference of the year as he comments on various questions from the media in the Press Gallery at B.C. Legislature in Victoria, B.C., on Monday, January 13, 2020. THE CANADIAN PRESS/Chad Hipolito
Interprovincial travel restrictions a no-go, Horgan says after reviewing legal options

The B.C. NDP government sought legal advice as concerns of travel continue

Gem Lake Top, at Big White Ski Resort, seen at Jan. 8. (Big White Ski Resort)
Big White cancels $7.3M in lift tickets, accommodations due to COVID-19 orders

Since November, the ski resort has been forced to make several changes

Darlene Curylo scratched a $3M ticket, BCLC’s largest ever scratch and win prize. (BCLC)
Kelowna woman in shock after winning BCLC’s largest-ever instant-ticket prize

Darlene Curylo couldn’t believe her eyes when she saw the amount of money she’d won from a scratch ticket

While each person has different reasons for becoming homeless, a UBCO study shows they learn through their interactions with different services to perform ‘as homeless’ based on the expectations of service providers. (Contributed)
Kelowna homeless forced to ‘perform’ for resources, says UBCO study

One participant in the study said ‘It is about looking homeless, but not too homeless’

Gov. Gen. Julie Payette takes the royal salute from the Guard of Honour as she makes her way deliver the the throne speech, Wednesday, September 23, 2020 in Ottawa. THE CANADIAN PRESS/Fred Chartrand
Gov. Gen. Julie Payette resigns, apologizes for ‘tensions’ at Rideau Hall

Payette, who is the Queen’s representative in Canada, has been the governor general since 2017

Grounded WestJet Boeing 737 Max aircraft are shown at the airline’s facilities in Calgary, Alta., Tuesday, May 7, 2019. WestJet will operate the first commercial Boeing 737 Max flight in Canada today since the aircraft was grounded in 2019 following two deadly crashes. THE CANADIAN PRESS/Jeff McIntosh
Passengers unfazed as WestJet returns Boeing 737 Max to service on Vancouver flight

After a lengthy review process, Transport Canada cleared the plane to return to Canadian airspace

The top part of the fossil burrow, seen from the side, with feathery lines from the disturbance of the soil – thought to be caused by the worm pulling prey into the burrow. (Paleoenvironntal Sediment Laboratory/National Taiwan University)
PHOTOS: SFU researchers find evidence of ‘giant’ predatory worms on ocean floor

Fossils found the prove the existence of an ancient Taiwanese worm as long as two metres

Most Read