The first step towards paying off your debt should be filling out the Printable Debt Snowball Worksheet. This worksheet will keep a running list of all of your debts. It will also help you organize your debts in a way that is proven to work and prevent you from being overwhelmed by your debts, no matter how big or small they are.
As you begin to fill out the worksheet, you need to organize your debts in order from the smallest debt to your largest debt and place them in the “Debt Name” column. Make sure to list every single debt you have, even if you are not currently making payments on it. These should go in order of the total payoff and you do not need to factor in interest rates. This concept can be difficult to grasp when making the list, especially when you first begin to pay off your debts. There is one exception to this rule. If you have multiple debts that have very similar payoffs, you can place the lower interest rate first. The point of this method is to gain momentum in paying off your debts. This is not obtainable if you are stuck focusing on interest rates. The benefit to starting with your smaller debts first is that you will see and feel progress instantly while paying down the debts. It gives you the quick motivation to keep going.
The harsh reality of your financial situation sinks in when you fill out the “Total Owed” column. Gather the total amount that you need to dish out in order to pay off each debt, and fill it in. Next, for the “Minimum Payment” column, insert the minimum amount you are required to pay on that debt. If you are currently making more than minimum payments on any debts, stop. Move that extra money over to your smallest debt. The “New Payment” column is where you will see your “snowball” build. The first item under this column will have the same amount as the minimum in addition to the extra money you were paying on other debts. Add the first minimum payment to the second for the next total. For the third, add the first three minimum payments together, and so on. This will give you a list of compounding payments. “Payments Remaining” is the number of payments that you need for that particular debt while continuing to make minimum payments on it.
Now, add up the minimum payment column. The amount totaled that you see in front of you can never go towards anything other than debt payoff during this process. As you take on this challenge, it is vital to remember that you can never reallocate money dedicated towards this chart. When you pay off one debt, there will be “extra money” in the future that was going towards that debt’s payments. The extra cash has to be transferred over to the next debt in order to create the desired snowball effect. Figuring out how many payments are left total is another way to track progress. Every time you pay off a debt, create a new sheet. Remember to keep your old sheets to reflect back on the progress that you have made. You can even update this sheet every few months or so if you desire to see your progress more frequently.