When we realized how high our monthly payments were, my husband and I decided to try the Debt Snowball method to pay down our debt. We were so mad at working our butts off every month just to send most of our money to creditors and other bills. It was so discouraging!
Once we read The Total Money Makeover by Dave Ramsey, the best 15 bucks you’ll ever spend I promise, we were fired up. It was on like Donkey Kong. Our debt was going DOWN!
We saved up our Beginner Emergency Fund fairly quickly. You can click here to read our Baby Step 1 Story. So we moved on to Baby Step 2, the Debt Snowball.
Do you remember as a kid burning leaves with a magnifying glass? The magnifying glass in and off itself isn’t strong enough to do any major damage. But when you use the magnifying glass and a ray of light from the sun, it compounds the sun’s energy until enough heat is created to burn something. It isn’t very long before those leaves start to smoke and smolder and a small flame will start.
The Debt Snowball does the exact same thing in your debt payments. A little bit of extra money here and there isn’t really enough to make a huge difference. But when ALL of your extra funds go to ONE loan, you will start to see immediate progress.
So how did we do it?
Basically, just like with a magnifying glass, in a Debt Snowball you focus all of your extra funds on one loan until it is completely paid off. Then you focus everything on the next loan until that one is paid off as well.
Here is the play by play recommended by Dave.
Step 1 – Get caught up on any late payments. Make sure you are paying JUST the minimum on any debts. You can read How to Budget When You are Behind on Bills if you are overwhelmed with how behind you are. It offers a step by step process to get caught up and set a budget that will work so you can focus on paying down debt.
Step 2 – List any debts from smallest to largest. Credit cards, medical bills, personal loans, car payments, that one time you borrowed $100 from your friend. Any money you owe to anyone else should be listed here.
Step 3 – Put any extra money towards your SMALLEST debt. Continue paying just the minimum on everything else. By concentrating all of your efforts (or extra funds) on one loan, you will pay it off even quicker. In turn, this will free up more and more money to help pay things down.
Step 4 – When your smallest debt is paid off, take all of the money you were paying on that loan and add it to the minimum payment you have been making on the second loan. Continue doing this until this one is paid off as well. This will give you quick wins that will help you stay motivated.
Step 5 – Continue paying off your loans, smallest to largest. By increasing the amount of money that is freed up for your next debt, your “snowball” just continues to grow. Eventually you will have a lot more money going towards your last few loans. This will speed up how fast you are able to pay off the loans, until you are debt free.
You guys. I don’t know why we didn’t think to use the Debt Snowball before. It made so much sense as soon as we learned about it. And it works. We are proof of that!
Our debt snowball helped us pay off over $80,000 of debt. You can click here to read Our Debt Free Story. And now we are building up our Fully Funded Emergency Fund.
Before the Debt Snowball, we would put $50 extra on a credit card, $20 towards a medical bill, and $100 in savings. We soon learned we were going nowhere with this. It was taking forever. But taking all $170 and putting it towards ONE loan actually made us see progress. We were able to wipe out our first debt in just a couple of weeks. It was amazing!
If you are looking for an effective method to pay down your debt, I cannot recommend this method enough! If you have any questions, feel free to reach out. I love to hear from my readers and would love to help if I can.
Sidenote: Another thing that really helped us was tracking our budget and goals month to month. I have several free finance printables that will help you stay focused and organized. If you are interested in getting your hands on these, feel free to enter your email in the box below. You will be given access to the Simple Finance Toolkit, where you can download my printables to your little heart’s content. Cute printables that will help organize finances? Yes, please!
What is one thing you are looking forward to when your debt is paid off? Any words of wisdom about the Debt Snowball you would like to share with other readers? Sharing is caring!
You can read the first post in this series right here. Baby Step 1 – Our Beginner Emergency Fund