The debt snowball method is an effective way to pay DOwn debt until you’re finally debt-free. But do you think there are reasons to Pause Your Debt SNOWBALL?
The well-known debt snowball method suggests listing your debts in order from the smallest balance to largest balance. Then you throw extra money—”the snowball”—at the smallest balance while making minimum payments on the other debts.
After crushing that first debt, you roll over that payment into the next one on the list. The snowball gets bigger and bigger with each debt you eliminate.
By the time you reach the final debt with the largest balance, you will have amassed a giant snowball that will help you crush that debt faster than you initially imagined.
That good ol’ debt snowball is hard to stop when it gets rolling. But there are times when it’s perfectly fine to press pause. Really, it is.
We can get tunnel vision when focusing on a goal, but life happens and we must reconsider where to put our energy and our money.
7 reasons to pause your debt snowball
To pause your debt snowball means to continue making minimum payments on your debts, but putting any extra money toward other goals instead of making extra debt payments.
For example, you’ve been putting a combined $500 towards debt payoff each month: $300 to cover minimum payments and $200 toward your Visa credit card (the debt with the smallest balance). When you pause the debt snowball, you continue paying $300 to cover minimum payments and put that $200 towards another goal, which will be explained below. After you reach that short-term goal, you start paying $200 extra each month to Visa again.
The main reason to pause your debt snowball is to avoid going deeper into debt. Here are specific scenarios that fall under that umbrella.
1. you can’t cover your basic needs.
Stop everything! The debt snowball should not be a priority at the moment. Your mission is survival. This should go without saying, right?
Please just pay the minimum on your debts until you can cover your basic living expenses— rent/mortgage, utilities, groceries, gas for the car, etc.—with ease. Then you can reintroduce a little fun to your budget, e.g. occasionally dining out and a Netflix subscription. Having a little fun is crucial for your happiness.
After that, you can restart the debt snowball. I know it sucks to not be able to crush debt like you want, but it’s better than not having a roof over your head or food in your belly.
If you can’t make minimum payments on your debts, then please pick up the phone. Call your creditors and try to work out something. Who knows? They might put you on a lower payment plan, move your payment date back, eliminate fees or let you pause payments due to hardship. They can’t help you if you don’t alert them to your situation.
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2. You HAVE NO SAVINGS.
Scenario 1: Your emergency fund is non-existent. No bueno. Pump your brakes!
You can’t be out here without a cash cushion to cover your basic costs when a recession hits or cover your car insurance deductible in case of an accident.
Your first line of defense against going into debt is having cash. Pause your debt snowball to beef up your emergency fund. Start with whatever you can afford until you get $1,000. Then keep going from there.
NOTE: If you have high interest rate debts, like 7% or higher, then consider saving and sending more than the minimum debts simultaneously or paying off that high interest rate debt quickly to then focus on saving. You wanna have cash, but you also don’t want to be eaten alive by interest.
In September 2018, I had less than $400 in my savings account. I was a sad statistic.
A recent Bankrate survey found that six out of 10 Americans would not have enough savings to pay an unexpected $1,000 expense, such as a car repair or emergency room visit — and the same was true for me.
My goal of paying off debt quickly had taken priority over saving to my detriment. I live and teach English in China, so having such scant savings left me in a precarious position. What if I needed to book an emergency flight back to the U.S.? What if I got hurt or became sick and needed to take time off from work?
To be honest, I felt dumb and disappointed in myself for not having a better cushion between me and an emergency, knowing that I could have saved more.
So I set my sights on saving $10,000 in seven months. Click here to learn how I did it.
I KID YOU NOT—within weeks of crushing the savings goal in April 2019, the floodgates opened. My mom asked me for $150 to cover bills. I thought I’d have to spend $200 to replace my battery-powered bike. And the bank didn’t shell out my salary on time. A WHOLE MONTH’S PAY!
Do you see why you need an emergency fund? Get step-by-step instructions on how to find your unique savings number and start building an emergency fund.
Scenario 2: You dipped into your savings. You rain over nails and got four flat tires. Then you used your emergency fund to cover it. To replenish the coffers, press “Pause” and put any extra money back into the fund for the next snafu.
We know it’s not a matter of ‘if’ one will arise. It’s ‘when.’
3. you’re PREGNANT.
First of all, congrats! Babies are amazing little creatures and can bring lots of joy to a home. But they can also be expensive.
Pausing your debt snowball to save for this major life change could work in your favor if:
- complications arise during pregnancy or delivery that come with a hefty medical bill
- you have little to no maternity/paternity leave and lose income to stay at home longer than expected
- you have to shell out more money than expected for babyproofing your home and buying new baby items
Stockpile money for as long as you can during your pregnancy. When everyone comes home healthy and strong and childbirth-related bills are paid, then restart the debt snowball with all that cash.
4. you encounter job loss, divorce or other major life eventS.
I sincerely wish you the best if you fall under this category. Surgeries, cross-country moves and job loss can be difficult experiences to deal with on their own. Going into more debt to cover those costs piles on the pain.
To avoid huge charges on a credit card, pause the debt snowball and only pay minimums on debts so you can cash flow expenses and get emotionally and financially stable. You’ll feel much better being able to pay for items in cash than becoming further indebted.
In the case of job loss, I hope you consider cutting unnecessary expenses, selling items and picking up any job right away until you find your ideal gig. Assuming you have an emergency fund, taking these measures can help you stretch out those savings or not have to dip into it at all.
5. You’re not sure of your next move.
Maybe just pause for one month to try to figure out the next step. You’ll want cash on hand if you’re considering moving or getting a certification for a better job.
Here’s another way to think about it: If you give all of your money to your Visa, guess where you’ll go when you have no savings and you need money again. That’s right! Visa.
You can’t ask Visa for those extra payments. There are no refunds!
If you feel more stable or decide on something else after a month or two, then throw that savings back into the debt to restart the debt snowball.
6. YOU HAVE A ONCE-IN-A-LIFETIME OPPORTUNITY.
Debt payoff is important, especially if you’ve got a ton of it. But sometimes an event pops up and you know it won’t come around again. For example:
- a cousin’s wedding will bring together family you haven’t seen in years
- a sick relative requests your presence
In July 2019, I diverted cash from extra debt payoff to fly from China to the United States for my grandmother’s 75th birthday party. When my grandmother turned the corner, we yelled “Surprise!” Tears of joy streamed down her face. I cried, too.
Now, that’s priceless!
I would’ve kicked myself for missing that day. Four generations of our family were under one roof in addition to several friends. I hadn’t seen some folks for maybe four years.
Sometimes, there will be things you value more than debt payoff. That’s fine. Just don’t pause the debt snowball forever. The shorter the pause, the better.
CAUTION! This can be a slippery slope. If you pause your debt snowball for a special family event, then what’s stopping you for doing it for a just-because vacation to Italy? If you have a huge desire to do something that could be expensive, consider allocating some money into a dedicated sinking fund for that event over time instead of pausing your debt snowball altogether. Get tips on how to incorporate sinking funds into your life.
Also draw a hard line between for what you WILL and WILL NOT pause the debt snowball. When you’re emotions or desires get the best of you, then revisit this list.
7. another Debt Payoff Method makes more sense than the debt snowball.
Your debt snowball is supposed to roll from the smallest balance into the next. Well, what if two balances are nearly the same, but have different interest rates?
That $623 student loan incurs only 1.9% interest each month. But that Chase Card’s gotchu for 24.24% interest each month. That balance is $825. The student loan’s accruing about $0.40 of interest each month. Chase is accruing nearly $20, and you’re only making $30 minimum payments. That’s hustling backwards.
This was my predicament on May 1, 2018. I wanted to get rid of that credit card for the emotional win, peace of mind and savings on interest incurred. And guess what! I paid it off on May 31—in just one month! Switching from the debt snowball to the debt avalanche paid off big time!
Final words from the wise
Don’t beat yourself up if you have to pause your debt snowball. Remember, it’s only temporary. And success is not linear. We will face peaks and valleys. Motivate yourself to clear up that temporary situation as fast as you can so you can jump back into debt payoff.