When I first heard the term “Debt Snowball” I will admit that I was very skeptical. But the more I read the more I became convinced that snowballing debt is the way to go! Dave Ramsey is one of the financial people whose advice we like and he is the name associated with the Debt Snowball. The premise is simple. List your debt in order of highest amount to lowest amount due. Pay no attention to interest (this is the area that took my husband and I awhile to wrap our heads around) and start paying off your lowest amount of debt first. (Well, really your first step is to build a $1,000 emergency fund.) Then you work up your list until you have paid off your biggest amount of debt last. By paying off your debts quickly you are more likely to continue doing so – it’s all the principles of behavior modification and reinforcement.
My husband and I paid off most of our debt in the last 2 years. All we have left our student loans (eeek – $45,000 – that’s a Bacehlor’s degree for my husband and a Master’s degree for me) and our mortgage. When we were first married we had debt and we had no idea how to dig ourselves out. I really wish someone had told me about snowballing debt 8 years ago!
Today I had a long talk with my dad who is going to make some changes in his life – he has to! He is turning 50 this year and has no health insurance, no retirement, no property, and $40,000 in debt. I am not the kind of person who pushes my advice on others without being asked – but once you give me permission there is no holding back. I asked my dad if he knew how much money he was in debt and he didn’t know exactly. He guessed that it was around $40,000. So I gave him some homework for tonight:
- Make a list of his debts in order from highest to lowest.
- Buy “The Total Money Makeover” and start reading.
- Think about a plan to get out of debt. Just think for now.
I could actually hear my dad smile from 3,000 miles away. He was relieved to know that he could make a plan for himself and that there was an end in sight.
It doesn’t matter how you tackle debt. Some days will be fabulous and you will have a huge smile on your face while you think “I’ve got this!” while other days will be downers. The fridge will break, the dishwasher will leak, the garage door won’t open, the car will need a new transmission (hopefully not all on the same day!). If getting out of debt is your goal, do some research. There are many financial plans that you can find online for free. We are Dave Ramsey fans in our house – although we don’t agree with every single thing he says we find that we agree with his approach overall and we tweak it to fit our needs.
Price are increasing across the country. The increased price of gas means we will see an increase in the grocery store aisles. Unemployment is high. Jobs are scarce. Although you may start (and end) the day feeling like there is a black cloud hanging over your head just know that you can do this! You CAN pay down your debt one dollar at a time.
We just received our lien release for our truck in the mail today….13 months early! One of my student loans will be paid off this month too! It feels sooo good!
Good for you for helping your dad!
We too are big Dave fans. Like him or not…his plan works. We’re living proof. In the last 16 months we have paid off $20K in debt (through two layoffs). We still have $45K to go, but we have seen it work and already feel the relief of some pressure.
You’re right…just knowing there is a way out can really help even when you know it won’t be easy. And most people have no idea how much debt they truly have. Those who do typically are already working on getting out of it or already have!
Great job with your snowballing and with helping your dad. Money can be a tough subject, but it feels so good to be able to help others!
Dave Ramsey has seriously changed our lives. For the first time in our (dh and I) 9 years together we officially have a savings account and are on our way to becoming debt free. We are just starting our second month of our debt snowball and we already knocked off two bills. It is such a huge stress relief having a financial plan and seeing the results is priceless!