January in Central Ohio always means snow - even for debt.

January in Central Ohio always means snow - even for debt.

Using the "debt snowball" method to tackle higher-interest debts such as credit cards, auto loans and personal loans is an effective way for many parents to significantly reduce the money they owe.

"It's a great method for taking control," said Kathy Virgallito, a director of Consumer Credit Counseling Services in Columbus. "It can shave quite a number of years off the debt payoff. It has real results."

With holiday bills coming due and New Year's money-management resolutions to be honored, it's a timely topic. According to the Federal Reserve, about half of U.S. households have credit card debt, and those that do owe an average of $15,799 at 13-percent interest.

How does a debt snowball work? First, you outline everything you owe, to whom, and the interest rate on each debt. Then arrange the debt in the order you'd like to pay it off. Some people start with the smallest debt and work their way up. Others choose to tackle the one with the highest interest rate first.

"Some people feel a lot more rewarded if they pay off a card completely, so they might choose to start with the smallest debt," Virgallito said. "(But) if you want to save yourself as much money as possible in the long run, start with the highest interest rate debt."

Once you've chosen a strategy, pay the minimum monthly payment on all other debts except for the one you have targeted for payoff. Concentrating on one debt at a time helps you focus and concentrate your energy on a concrete, achievable goal. Pay as much above the minimum payment as you can, each month, every month until the target debt is paid off.

When that debt is paid, begin the snowball. Add the money you were sending to the first debt to the minimum monthly payment of the next debt. For instance, if you were paying $100 toward debt No. 1 and $25 toward debt No. 2 each month, you'd send $125 to debt No.2 each month once the first was paid off.

In theory, the debt snowball is similar to a snowball rolling down a sledding hill. As it moves along, it grows larger, moving faster and building momentum. Your outstanding loan balances will go down significantly, but the amount you are paying to service your debts stays the same every month.

But be realistic about how much extra money you can afford to pay, Virgallito said, and then set up automatic bill payment from a bank account to make it easier. After that, Virgillato advised looking at your spending and identifying areas where you could cut and free up more money.

Once the snowball is moving along, you can add "snowflakes," which are small, irregular amounts of "bonus" money you add to the highest monthly payment. Think spare change, that $2 mail-in rebate check, or cash from sales on eBay.

Those snowflakes can be empowering, Virgallito said, "once you start paying attention to the money coming into and going out of your life, you're in the driver's seat."

? Denise Trowbridge is a self-professed money geek who writes about personal finance, banking and insurance for The Columbus Dispatch, bankrate.com and middlepathfinance.com.