- 1). Gather all of your bills in front of you. Do not include monthly bills like your phone, electricity or your water bill in the debt snowball. Use credit card bills, school loans and and mortgages.
- 2). List the amount you owe for each debt. You may want to arrange your list in order from the least amount owed to the most. It also might be helpful to arrange it from the debt with the highest interest rate to the debt with the lowest interest rate.
- 3). Create a budget for all of your monthly bills--including those such as utilities--along with the minimum amounts due for all of your debt. Once you have budgeted for those amounts. look at any extra money you may have. Put that extra money towards your debts.
- 4). Focus your attention on the first item on your list, whether this is the lowest amount of debt you owe or the debt with the highest interest rate. Send whatever amount of extra money you have to this first bill until you have paid it off.
- 5). Take the amount you were sending to your first debt and add it to the next item on your list after the first one is paid off. The will create a spiral of healthy financial flow.
- 6). Send the amount previously set aside for the first and second debts for the third debt after the first two are paid in full. Keep doing this for each item on your list, It creates a snowball of money that keeps getting bigger to knock down each of your debts. The money will trickle down until all debts are eliminated.
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