I have said it before and I’ll say it again, the day I got comfortable talking to my husband about our finances, was one of the biggest sighs of relief of my life. For years we went to church and listened to them talk about some of the best Dave Ramsey methods to payoff debt. When we finally buckled down and gave it a go, we were surprised at just how easy it was. We have implemented budgets, get out of debt strategies, and better ways to save. I have included easy to follow printouts in my Fun Sized Budget Bundle on all the methods we use to keep our finances on track, so you can take full advantage of these practices as well. Right now I’ll show you how the debt snowball helped us pay off $6,000 of debt in only 6 months!
*This post contains affiliate links. For more information, see my disclosures.
When you have serious debt, there are three options you have to help you tackle it before starting the debt snowball:
If you are ready to tackle your debt with a proven, highly effective method, then let’s talk about Dave Ramsey’s Debt Snowball.
I’m going to try to keep this cut and dry. The basic idea of the debt snowball is starting small and accumulating more and more (payoff) as you go. First of all, you’re going to need an extra $200 per month. –That’s the zinger. That was what took Tom and I so long to actually hop on board with the Snowball Method. We didn’t have an extra $200. Or at least we thought we didn’t. If that is your first thought as well, take these 3 steps:
Chances are, somewhere in here, you can find an extra $200. I was blown away when we added up our “really extras” to find how much we spent on quick trips to Target, (go figure) Taco Bell or coffee shops.
Budget Bundle – Here is a great, easy to use, beginner budget bundle to track your monthly spending as well as your debt payoff and savings.
Charlie – People are saving an average of $80 per week by getting text messages from Charlie on how to reduce their bills and track their spending.
Arcadia – Create a FREE account, and get connected to clean energy and reduce your monthly costs.
Cushion – Cushion finds places to get you refunds on bank and credit card fees.
Cut cable – Cut your cable and save yourself thousands by using a digital antenna instead. Mohu is a digital antenna that you can connect throughout your home.
OhmConnect – Get rewards for saving energy! They offer energy saving events to help you save on the cost of your energy bills and in some states will actually pay you for participating!
Ting – The average phone bill with Ting is $25 per month. You choose your phone usage ahead of time to help yourself save money and it probably already syncs with your current phone.
Trim – Trim is a savings app that reviews your monthly spending and looks for areas where you could be paying less for your bills.
It can be stressful trying to come up with an additional $200 per month. Maybe you have already cut your memberships, you don’t have cable and don’t know what else to do.
The best part is, it is easier than ever these days to find ways to earn additional income. Here are some great ideas to get your starting finding extra money.
Now that you have your $200 extra per month, let’s talk strategy. Here is your basic starting sheet. *You can download your printout at the end of this post*
In the top column, write out your debts with the biggest debt being in the #1 box. The #2 box will be your second largest, and so on and so on. Below each of these, fill in your total balance owed for each. Then below that, fill in what the minimum monthly payment is for each. Now, you are going to take your $200 and apply it to your smallest debt first.
As you can see, our $300 credit card was our smallest amount.
Our minimum monthly payment was $30.
We added the additional $200 to that $30 and were able to pay $230 toward our $300 total.
After we finished paying off that remaining $70 from our credit card, we took the remaining $160 and applied it to our $100 payment for our hospital bill. So we applied $260 to our hospital bill in January.
Then by February, we had our original $30 (from credit card #1) + $200 (snowball money) +$100 (hospital bill)= $330 to begin applying to our hospital bill. As you can see, that $330 easily paid off the remaining balance with $20 left over to add to our next debt. Are you starting to see the snowball effect?
By May we were able to put $530 toward our big credit card.
Now we have racked up a huge snowball and it just rolls fast and faster knocking out debt one step at a time. By the time we got to our biggest debt it only took a little over a month to completely polish off that remaining balance and we still managed to have an additional $210 leftover.
Now, at the end of this 6-month snowball, we found ourselves with an additional $930 a month! Even if you skim off that additional $200, there is still a $630 surplus in our bank account each month!
The Dave Ramsey debt snowball method definitely requires discipline but has a huge payout if you can stick to it! It has been over a year since we were able to dig ourselves out of this much debt. I am still amazed at how easy it really was and how great it felt to watch those numbers get smaller and smaller each month.
Once you have finished your debt snowball, you will find yourself a ton of extra money each month! The worst thing you could do with this is immediately starting spending it. Instead, look into some of the best and smartest savings options available.