In part 1 of this series, I talked about paying off debt from the highest interest rate to the lowest in an effort to save as much money as possible. In this part I will talk about a way to pay off debt that has more focus on making the person doing so feel a greater sense of accomplishment and give a little quicker gratification.

With a method that has been referred to as the snowball method, the idea is to start small and build up to the larger debts. With this method of debt elimination, the idea is to list all of your debts and their current balances. Then, you line them up from lowest balance to highest.

Starting with the debt with the lowest balance, take the money that you want to use to pay off your debt and focus on that debt. After that one is paid off, move to the next one on the list, and continue down the list always focusing on the debt that has the lowest balance.

The effect of this is that you begin to see results very soon as your smaller debts become eliminated and you suddenly have less bills you have to pay. Also, it makes paying down those larger debts easier because the money that previously would have gone to making payments on the smaller debts can be added to the amount paid on the larger ones each month.

This is where the snowball part comes in. You start with a small amount of extra money each month to pay on the smallest debt. When that debt is gone, you have the small amount plus the minimum payments from the smaller debt to work on the next one. The amount that you can pay extra each month on a given debt continues to grow as the smaller debts are eliminated and their payments are added to the “extra payment” amount.

While this may be a good suggestion for short-term motivation, it can cost more in the long run dollar-wise than the method discussed in Part 1. Another drawback to this method is that the money will begin to snowball fairly early, and if a person is not disciplined enough they might spend it on butter rather than staying in “debt elimination mode” and using it for the planned purpose.