You may or may not have heard of Dave Ramsey’s Debt Snowball, but if you have, believe me, you’re going to want to hear how we managed to make the snowball even faster. In just 6 months, we were able to pay off over $6,000 worth of debt! If you had told me 5 years ago that I would be able to put $1,000 per month toward debt I would have told you you were crazy. We were living paycheck to paycheck. There was no way. Here’s the breakdown of how we made it happen and how you can too.
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Jumping into debt payoff can be tempting, but the truth is there are a few steps you have to do before you start.
If this is totally uncharted territory, I get it and I have been there. That’s why I piled all of my personal methods for organizing my budget and put them together in a Budget Bundle. The printouts in the bundle are designed to help you build a budget, manage your savings and organize debt payoff amongst other things. As a bonus, I’ve included a video tutorial that walks you through each printout so you can be sure to make the most of your Budget Bundle. Click here to save $5 on The Budget Bundle.
Before you get started with the Debt Snowball, there are a few things that you can look into that could help you reduce the amount of debt you have and could also reduce your monthly payments. But first, it’s important to cover your own back by building a smart, secure, savings.
The first step before starting any sort of debt payoff journey is to make sure you have secure savings in place. Most people will tell you a $1,000 emergency savings is a good place to start. However, in our own personal experience, we have learned that this isn’t always enough.
During our debt payoff, we continually had to pull money from our emergency fund for unexpected setbacks like car troubles or hospital bills. Then we’d find ourselves having to re-build this fund over and over again.
My best piece of advice, to help you avoid draining your savings is to add a small amount to it while you pay off debt. Yes, it may take away some money that you could have put toward debt, but I believe it can help immensely to protect you against emergencies.
One of the best accounts I have found for building an emergency fund is CITBank’s, Savings Builder. With monthly automatic deposits of only $100, you are able to get a higher paying interest rate. I also believe the best way to avoid taking from your emergency fund is to have your savings separate from your regular bank. Just another reason that makes the Savings Builder a smart choice. Click here to apply for a Savings Builder account online.
If you have several debts (especially with higher interest rates) a good option to look into is taking out a loan with a lower interest rate and/or consolidating your debt.
If you’re worried about taking out a loan or are looking for alternative ways to lower your payments, you can always try negotiating your interest rates. This is an especially smart move when it comes to high-interest credit cards.
If the idea of negotiating interest rates FREAKS you out? I’m with you. You can click here to grab my FREE negotiation scripts that give you the exact word for word script to use when calling your credit card company.
I’m going to try to keep this cut and dry. The idea of the debt snowball is all about starting small and accumulating more and more (payoff) as you go. A quick run down looks like this:
The first step in starting the Debt Snowball is finding an additional $200 per month to put toward debt. A lot of people believe that finding extra money means working more. In reality, there is a good chance you already have $200 hiding in your budget.
Going through your budget and doing a spending inventory can help you get clear about where you are currently spending your money. After you’ve done that, you can more easily decide areas where you could cut back or reduce spending. Check out the spending inventory in The Budget Bundle.
One of the best and fastest ways to get more money in your budget is by cutting those expenses that you pay every month. Go through your budget and find ways that you can reduce or eliminate the expenses that you pay for every single month. Top areas to cut:
There are companies and strategies that will help you significantly lower the cost of your phone plan each month so you have more money to put toward debt payoff.
Chances are you are spending way more on food each month than you realize. If meal prep and grocery planning is not your thing, I highly recommend checking out $5 Meal Plan. You can get customized, affordable meal plans for your entire family! Click here to get our $100 Costco grocery budget for our family of 5.
A great way to make more money every month is by decluttering some of what you currently have. When it comes to big-ticket items like electronics, I have found a lot of success with the Mercari app.
Grab the Debt Snowball Printout here to get started and follow along, or you can snag more debt printouts in The Budget Bundle if you feel like you need a little more help with organization and tracking!
Once you have your $200 extra per month, the Debt Snowball gets pretty simple. I recommend downloading my Debt Snowball printable to help you keep track of your debt payoff and to get an idea of how quickly you can pay off your debt.
As you can see below, our $300 credit card was our smallest debt.
Our minimum monthly payment was $30.
By adding the additional $200 to that $30 we were able to put $230 toward our smallest debt of $300.
*Remember, you can always put more money toward debt if you are able to! This will help you pay off debt faster and save you from additional interest!
As you can see, after we finished paying off our remaining $70 from our credit card, we took the remaining $160 and applied it to our next smallest debt.
Once we paid off our smallest debt, we were able to take the full $230 that we applied toward it and begin putting that money toward our next smallest debt.
Because our minimum payment for our next smallest debt was $100, that gave us a grand total of $330 to apply toward that debt. Once that debt was paid off, we had $330 to begin applying to the next debt in line.
Now we had racked up a huge debt snowball and it just rolled faster and faster.
By the time we got to our biggest debt it only took a little over a month to completely polish off that remaining balance.
When we were finished paying off debt in 6 months, we still managed to have an additional $210 leftover.
While we were able to get out of debt $6,000 of debt in 6 months, this isn’t going to be the case for everyone. Depending on the amount of debt you have, your income, and your motivation, debt payoff will look differently for everyone.
My best advice is, if you struggle with impulse control and shopping addictions, then the Debt Snowball is the debt payoff method for you!
It works so nicely because paying off your smallest debt gives you the quickest reward — just like shopping — except in reverse.
Don’t forget to join my Fun Sized Budgeters Facebook group to help keep you motivated, get advice from like-minded people and stay plugged