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.
If you are coming up empty handed. Checkout Ting, a new phone company that allows you to hand select your plan — the average monthly payment is around $25! For our family of 3 (phones) that’s a savings of around $100 per month!
There is also an awesome app called Trim that will review your repeated spending and analyze your bills. They do this in order to instantly find you better deals!
I highly recommend taking advantage of my budget bundle to help you get your finances in order. If you are struggling to set aside money each month, consider using Sinking Funds. It has helped our family keep track of our grocery, repairs and gas spending and helped us improve our financial situation immensely so we aren’t constantly going over budget.
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. There are actually companies that will do this for you! Trim looks at your accounts and checks for recurring payments (like cell phone, internet and cable) and they work to find your discounts or cheaper options!
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.
Personally, I have always been able to find very part-time jobs (5 hours a week) that easily brought in an extra $200 a month. Scope out your local newspaper for these types of jobs. Sometimes you may pick up a few extra dollars from work, then a few more by selling some things. It’s important to keep track of how much you’re bringing in so you can make sure to put that money in the right place!
Get access to my Fun Sized Budget Bundle, where you can get an updated Snowball Method printout along with 17 other helpful budget, savings and finance sheets! You can also join the Fun Sized Budgeters Facebook group where you can ask questions and get advice from others who are going through the same things you are!
Another super awesome option is to start your own small business. If you enjoy photography, typing, makeup or fixing up old furniture etc, you can easily get creative and find a way to make your hobby a profit. Like a blog for example! See how I created an income from home by starting a blog.
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 start spending it. Instead, look into some of the best and smartest savings options available.