“Snowballing” Debt

“Snowballing” Debt

We live in the world that has allowed us to enjoy life now and pay for it later. I am referring to our ability to borrow or take out a credit. If we think about how this simple process shaped our behavior towards money, we can conclude that it results in a “good” and “bad” outcome. Most of the time, we the financial advisors, see the “bad” outcomes more often.

What we need to understand as users of “Credit” is that most of us are ignorant about the management process. Because we are not taught the basics of personal finance until we are faced with the reality, we tend to take wrong actions (such as overuse credit cards and not pay them off on time & borrowing for wrong reasons).

If you happen to find yourself in a situation where there is a mountain of debt controlling your life or you just want to learn how to be a good user of “credit”, understanding the “Snowballing” concept of debt will be critical.

What is “debt snowball” you might wonder?

When we have to use credit or borrow to pay for our lifestyle choices and don’t have the ability to pay back right away, understanding that making extra payments towards the balance helps speed up the process of repayment. This is what “snowball” is all about.

For example: if you have borrowed $5,000 at 10% interest per year with a minimum payment of $350 per month.

*Source: www.whatsthecost.com


It will take you 16 months to pay it back if you only make a minimum payment.

*Source: www.whatsthecost.com

Had you decided to increase your minimum payments by $100 more per month, it would have taken you 12 months to pay this balance off.

This is a basic concept that all of us can understand and learn how to use.

I would like to share a “tool” with you that we use to come up with “snowball” plan. www.whatsthecost.com is a free website, which allows us to enter the different debts, amounts, interest rate, monthly payments and how much more per month we would like to devote paying this off. The site calculates the number of years or months it will take to pay it off completely.

The reason I am sharing this with you is because I would like you to be educated consumers. If it happens that you need to utilize debt, then I hope after checking this tool out, your mindset and attitude about caring debt should start to change.

Now I’d like you to create your own “snowball” for the debts you have outstanding and let me know how soon you’ll be debt free. I would love to celebrate this victory with you!


Anna Sergunina
Anna Sergunina

I'm Anna Sergunina, CFP®, President & CEO at MainStreet Financial Planning, Inc. My passion lies in serving others through financial planning, helping clients achieve their dreams like buying a home, saving for education, or retiring early. With over two decades in the industry and a CFP designation since 2009, I'm dedicated to excellence and continuous growth. Beyond work, I cherish moments with my son Liam, prioritize self-care, and engage in content creation for my Money Boss Parent Podcast and Money Library blog.

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