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 pay off an average of $1,000 per month of 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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Starter steps to paying off debt

Before our family started paying off debt, I am so thankful I learned how to first prep myself so that debt payoff would be easier and less stressful.

Here are the steps I recommend to get you started:

• Do a spending inventory so you know where your money is going every month. Don’t forget things like gas and groceries!
• Create a budget based on your spending inventory. Don’t forget to allow for wiggle room and fun spending!
• Ensure you have a solid emergency fund in place. Most experts recommend between $1,000 and $6,000 to get started.
• Track your bills, savings and debt payoff

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Should I invest during debt payoff?

If we were to have followed the Dave Ramsey Baby Steps during our Debt Snowball, the “rules” technically were to not to continue investing while paying off our debt.

However, I am so thankful Tom insisted on putting his foot down and insisted on continuing to keep and invest in his 401K.

After expanding my financial knowledge, I know understand how powerful compounding interest can be. (AKA our money makes more money), which is why I believe it is so important to continue investing even during debt payoff.

Do you need more than $1,000 for an emergency fund?

Another mistake I wish we had been smarter about was saving more than the recommended $1,000 and that’s it.

Throughout our debt payoff process we continually ran into financial hardships that would drain our emergency fund. Because our savings would dwindle, we were forced to constantly re-build it.

Baby steps to build your emergency fund

If I could go back and do it all over again, I would chose to set aside a $100 per month to keep beefing up our savings. That way we would still have been able to put the majority of our money toward debt while still growing our savings.

Where should I keep my emergency fund?

Another good idea is to open a savings account that is separate from your current bank account in order to store your emergency fund.

I can’t tell you how many times I over-spent and transferred money back from savings simply because they were both through the same bank. Having a separate online banking account can be so helpful to forcing you to slow down before you take any money from the account.

Savings Builder savings account

A great place to stash your emergency savings would be in an online account like the Savings Builder.

You can open a Savings Builder account with CITBank for as little as $100! This is perfect because CIT has high-yield accounts that will earn you more interest than a regular bank.

Click here to open a Savings Builder savings account.

How to pay back less

When our family started the Debt Snowball method, no one mentioned to us that a good idea to help save money and speed up the debt payoff process would be to get a lower interest rate. Especially on things like credit cards.

If you are unable to get a lower interest rate, you can also look up scripts online to help negotiate interest rates.

Negotiations are definitely a smart tactic, but unfortunately they don’t always work. That’s why it can be good to have a backup plan.

When to consider consolidating

If you have a significant amount of debt to pay off like we did, (we had a $12K credit card bill on top of car loans, student loans etc), it might be worth looking into taking out a loan with a lower interest rate or consolidation. Places like Lending Tree can get you an estimate in just minutes!

By taking out a loan to pay off our credit card we were able to go from a 25% interest rate to an 11%! That was a huge load of my mind because it felt like we were actually able to make a dent in that debt while we focused on paying off our other debts. Click here to get a consolidation estimate with LendingTree.

How does the Debt Snowball work?

Ok, that was a lot of pre-game info, but I want to make sure you have all the information before we go on.

Here’s the quick breakdown of how the Debt Snowball works.

1. Apply $200 to your smallest debt
2. Pay off the smallest debt
3. Begin working on next smallest debt

To help you keep track of everything, I created the Minimalist Budget + Debt Payoff Playbook where you can customize everything to fit your own financial needs.

Finding an extra $200

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.

Strategies for finding $200:

Do a spending inventory

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.

Cut your monthly expenses

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:

• Subscription fees
• Reduce grocery budget
• Cut back on out-to-eat expenses
• Review and eliminate your $10 and below purchases

Generate additional income

I started a few different side hustles in order to help accelerate our debt payoff. These are jobs I was able to do from home while raising kids and homeschooling! 10 Things I Did to Make Money From Home.

Get money for your clutter

Another thing we did to make extra money to help pay off debt quicker was to sell a lot of our items. Between downsizing our house and paying off debt our family of 5 easily eliminated half of our possession which relieved so much stress and helped us make some extra cash.

Organize your Debt Snowball printout

Grab the Debt Snowball Printout here to get started and follow along, or you can get all of my budget, savings and debt payoff printouts in the Minimalist Budget + Debt Payoff Playbook 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.

How to fill out the Debt Snowball printout:

1. Write out your debts – In the top column of the Debt Snowball Printout, write out your debts with the biggest debt in box #1. The #2 box will be your second largest, and so on and so on.
2. Fill in your totals – Below each of these, fill in your total balance owed for each debt.
3. Enter your monthly payment amount – Below that, fill in your minimum monthly payment for each debt.
4. Apply your $200 – Lastly, you are going to take your $200 and apply it to your smallest debt first.

Click here to buy the full Minimalist Budget + Debt Payoff Playbook

Applying $200 to your smallest 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!

What if you have money left over?

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.

Getting the debt snowball rolling

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.

Can everyone pay off $6,000 of debt in 6 months?

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.

What do I do after I pay off my debt?

Do not fall back into those nasty habits that got you into debt in the first place! This can be so easy to do as money management is largely a mindset issue!

Be sure to grab the Minimalist Budget + Debt Payoff Playbook to help you get organized and stay on track!

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