Tinkering with the Debt Snowball:
Most likely, you are in debt as most of the U.S. is living a bit beyond their means. Now, having said that, you don’t have to be and this is an easy way to attack your debt. It is called the Debt Snowball. What that means is you start out with your SMALLEST debt and hit it hard with payments. Then, once it is paid off, you will use that same money you were devoting every month to attack the next smallest debt…and so on. The purpose for this is to have a foreseeable goal. It will be amazing to see how your debt can slowly start out and then disappear quicker as the snowball grows!
So, what does this look like? Let’s say you have $4,900 in debt right now. It is spread out in the following forms: $500 on Credit Card #1, $2500 on Credit Card #2, $1200 on a personal loan, and $700 on Credit Card #3. The first step would be to order them from least to greatest.
- $500 on Credit Card #1 ($100)
- $700 on Credit Card #3 ($100)
- $1200 on a personal loan ($100)
- $2500 on Credit Card #2 ($250)
The numbers behind each debt are your monthly minimum payments that you make. Now, we have them in order from smallest to largest. We want to attack that first card completely out WITHOUT ADDING ANY NEW DEBT TO IT! Here is a chart to show what this Snowball looks like…now, these are just basic numbers for quick reference, but you would adjust it based on your interest rates, amounts, etc.
So, your first Credit Card will be paid off in 5 months. You will then take that $100 per month from that payment and add it to Credit Card #3 until that card is paid off. Then, on Month 7, you added in the extra $200 per month from debts #1 & #2 until the loan is paid off. In month 8, you have now paid off the loan! YAY! Now, you will take that $300 and apply to your final debt. Guess what, you now have an extra $50 after you pay off the final card and can start saving. That means you had $550 CASH available to you from this point on, so you now have an extra $550 you can put into savings! That will add up so fast! WOOHOO!
This example shows a very simple version of how this works. It will truly vary based on your own circumstances, but please know that many have been able to conquer their debt throw the snowball method and found themselves better on the other side. Don’t get discouraged as this is about accepting responsibility for your choices and, in the words of Dave Ramsey, “Live like no one else, so that you can live like no one else!” You CAN do this and we want to hear about your journey & successes!
Fun fact – we were in debt by so many digits! It was a scary undertaking for us for sure! However, we hit it hard and pushed towards our goal of being debt free! It took over 6 years to get to that point! It wasn’t easy, but it feels so good to be on the other side! I believe in you! Just give it a try! Be intentional! YOU CAN DO IT!
Speaking of Dave Ramsey, he is someone who is a big proponent of the Debt Snowball. He goes fully in depth in many of his different books which are available from Amazon and other retailers. The Debt Snowball is step 2 of Dave Ramsey’s 7 Baby Steps. Learn More about it from books like the Total Money Makeover.
Ready to try this for yourself? Here is a printable version of a Debt Snowball Worksheet that you can use to create your own successes in your journey to becoming debt-free! I did an example using our scenario above to show you what it would look like as you fill it out!
I hope you have the best of luck getting out of debt! It truly is life-changing!
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