The debt snowball method is much less complicated than it may sound. I explain it all in this post below!
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Money and debt are two very hush hush topics that no one likes to talk about. Most times, people feel they need to pretend they have it all in order to impress the next person, leaving them with mounds of debt and nothing to show for it.
After accumulating our mortgage, 2 vehicle payments, student loans, and random credit cards, we have some debt that we really are just sick and tired of paying on.
Thank God I found Dave Ramsey a few years ago. Truly, he has been a life saver and has really opened my eyes to the situation we have caused ourselves. Now, I’m not going to be sharing my personal information – you can use your imagination, but know I’m sharing because this method works and has already allowed us to pay off thousands in debt.
And let’s be honest, most people have debt because they need to keep up with the Joneses, prime example right here. I felt the need that I needed certain things for the house but didn’t actually have the money so a simple swipe of a credit card and BAM more debt. For what? My dogs to destroy? Ugh
Well, any way that’s why I wanted to share about Dave Ramseys Debt Snowball Method to work your way out of debt! If it’s working for us, I know it will work for and help others.
First and foremost I HIGHLY recommend grabbing a book or two of his as that’s where all the good stuff is at!
The audiobook version (below) is a great alternative to the physical copy – kids can’t ruin it!
What is the Debt Snowball Method?
The debt snowball method is simply a way to pay off your debt.
To start, you want to write out in order your debts from the smallest amount to the most.
From there you are going to make only the minimum monthly payment for each payment except the smallest amount.
The smallest amount you are going to throw any extra money you have towards this debt. Once this debt is paid off, you are going to take that monthly payment and any extra money you have and put it all towards the next debt on the list until that is paid off.
When you have the second smallest debt paid, you move on to the next, and the next and so on until everything is paid off.
You see, you take one monthly payment and add it to the next. Once that is paid you are adding two monthly payments to the next and so on. It really adds up and helps pay off the big payments at the end really fast.
You Will Want All the Steps
The debt snowball method is how you get out of debt, but there are steps to follow.
Dave Ramsey has set up a whole process in how to get out of debt and gain wealth. Its pretty awesome.
So, here are the 7 steps:
- Save $1000 as fast as you can for an emergency fund while completing your debt snowball.
- Use the snowball method to pay all debt other than your mortgage.
- Save 3- 6 months worth of expenses to fall back on in case of job or income loss.
- Invest 15% of your household income to retirement
- Save for you kids college fund
- Pay off your house
- Build wealth and give
That all seems pretty scary and actually feels impossible, huh?
Honestly, I try to be an optimist and I would rather try to work our way out of debt than say “this is just how it is, everyone has debt” but I’d be wrong. There have been thousands upon thousands that have dug their way out of debt using this exact method. I know it’s worked for us, it can work for you.
Ultimately, my goal is to pay off our mortgage at minimum of 10 years early. It’s a simple, yet scary big goal. We definitely don’t want to be going into our retirement and still paying on a house or student loans! Yuck!
Truly, my only regret is not finding Dave sooner.
You can even listen to him on his podcast for more motivation! Game changer right there!
Of course, this method is an outline of what has worked, but you can always change it up to really work for you and your family.
Now, it’s time to buckle down and make your money work for you!
Good luck!
One thing I don’t care for is the first step, I think you need a little more than $1,000 for an EF. I keep 3 months in mine. I just lost my job yesterday and because of that we are able to stay afloat. But these are great! We are still working on our snowball now. Ugh the dreaded student loans.
Yes, that is one concern I have heard from others is that an emergency fund should be more than $1000. Ugh that is awful about your job, but thankfully you have that cushion! The student loans are the worse!!!