A lot of people use the debt snowball method because they love that psychological "payoff" when they pay off their smallest debt first.
However, for the past several years, I've had a lot of success with what I call the "snowflake" method of debt repayment.
I make extremely small payments toward my debt frequently throughout the month. Although these $20 or $30 "micro-payments" do not seem like a lot, it can add up quickly.
Ditching the snowball method
I did use the debt snowball method endorsed by television personality Dave Ramsey when I had more than $10,000 of student loan and credit card debt in my 20s. However, I found out that paying off my smallest debts first cost me nearly $1,000 worth of interest charges. I could have purchased a new leather sofa with the money. The problem was my smaller balances typically had the lower interest rates. My credit cards with larger balances had higher interest rates.
Using on-line banking
In order to make my frequent micro-payments, I use on-line banking. I set it up so I could make payments anytime to our mortgage lender and credit cards. I typically don't send less than $20 at one time.
Paying off our mortgage
Many snowflakes eventually come together to make snow that can be formed into snowballs for pelting away massive debt such as mortgage debt. In order to become snow, snowflakes need uncomfortably cold weather. I make it uncomfortable for myself to have debt by keeping my mortgage statement on my office desk every day. I want to be reminded of how much we owe so I'm motivated to keep working hard. I also have a somewhat "cold" attitude about debt in general.
Making financial sacrifices early on
One of my secrets for getting out of debt and building wealth is that I've paid more toward my debts early on. Paying down the principal on my mortgage early on in the game is better than waiting until 20 years into a 30-year loan. Sometimes it only takes small financial sacrifices to get ahead. The key, for me, was to make those sacrifices on the front end. The same also applies to building wealth. By investing more earlier on, compound interest is the fertilizer that grows my money.
In keeping with the snowflake analogy, my husband and I don't have "snowball" fights over money. We are on the same team. Together, we paid off $40,000 of mortgage debt in 7 years. We have $108,000 left to go, which we hope to "white out" in another 7 or 8 years.
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