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.
*This post contains affiliate links. For more information, see my disclosures.
Jumping into debt payoff can be tempting, but the truth is there are a few steps you have to do before you start.
Before you can decide on a final destination, you first have to know the starting-off-point! That’s why it’s so important to make sure you are tracking your money before starting the Debt Snowball.
If budgeting has never been your thing, check out our Bucket List Budget method for creating a spending plan you can stick to while still reaching your financial goals.
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, $1,000 is usually not enough to cover most emergencies and if it is, you are left playing catch up month after month. Join the FREE Fast Cash Training to Save $1,000 Fast!
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. CITBank has an added bonus of being separate from your bank which naturally makes it more difficult to take money out “just for fun.” 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.
There are places online line LendingTree, that can help you get an estimate in just a matter of minutes.
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.
If you’re not sure where to begin looking or how to do a spending inventory, this is a process that we dive into in-depth in The Bucket List Budget.
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:
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 selling online with the Mercari app.
Personally, I started this blog which almost single-handedly helped us pay off debt. Curious about making money online? Free training on how to turn your skills into a virtual moneymaker!
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