Pay Off Debt Fast With Dave Ramsey’s Debt Snowball
Dave Ramsey is a household name when it comes to personal finance. His book, The Total Money Makeover, and his class, Financial Peace University have been read and taken by millions of Americans looking to get a good hold on their personal finances.
The financial guru has helped millions of people get out of debt with the debt snowball and obtain financial success with his 7 Baby Step Program:
Baby Step 1: Save a starter emergency fund of $1,000
Baby Step 2: Pay off all debts except the house using the debt snowball
Baby Step 3: Save a full emergency fund of 3-6 months of expenses
Baby Step 4: Invest 15% of your income into retirement
Baby Step 5: Save for kids college
Baby Step 6: Pay off the house early
Baby Step 7: Build wealth and give
While I don’t follow Dave’s principles 100%, his class really helped Jacob and I get a plan in place with how we were going to pay off all our debt with his famous debt snowball. This method helps you stay focused on one debt at a time and it gets paid off fast! Believe me, we paid off $87,000 of student loan debt in 27 months by following this method.
Here are some tips to help you be successful with using the debt snowball and get debt paid off as fast as possible!
Organize the Debts
Before you start paying off debt, you need to know exactly what debt you have! As intense as we were about paying off our debt, we honestly didn’t understand this right away. We didn’t know exactly how much we owed, and even who we owed!
A great place to start is by running your credit report with either Experian, TransUnion, or Equifax. P.S. You get to run this for free once a year and if you time it right, then you can run it every 4 months by using each company!
Your credit report will show you who you owe, and how much you owe. Make sure that everything on your report is legitimate. If not, you could have had some identity theft and fraud!
If you know that you have student loans, talk to your financial aid office at your university. They should be able to tell you how much you’ve taken out in loans, and who you will need to pay back.
List Debts Smallest To Largest
Once you have determined who you need to pay and how much you need to pay, you have to list your debts smallest to largest amount to get that debt snowball rolling. Dave says to ignore the interest rate and list smallest to largest.
I agree mostly with this! The only difference being credit cards. Credit cards normally have SUPER high interest rates and are, by my definition, the worst debt to have. Personally, I would pay off the credit card first and then move onto the lowest debt.
Let the Snowball Roll
Now that you have your debts in order, it’s time to start paying! With the debt snowball method, you pay minimums on all your debts while making additional payments to that smallest debt. You want to pay it off as fast as possible! Once your first debt is paid, take the amount you were paying, and then apply it straight to the next loan on the list.
For example, if you can put $1,000 a month to debt and your minimum payments total $800, you would put the extra $200 to that smallest debt. Once the first one is paid off, you still pay $1,000 a month to total debt, but now you might be able to put $250 to your next debt!
By using the debt snowball, you’ll see how quickly you can pay off debt! With every debt you pay off, you gain more and more momentum and that final big debt gets done relatively quickly!
How to Roll the Debt Snowball Faster
When you use the debt snowball, you’ll want to do it fast! Because who wants to delay being debt free? And there are ways to get it moving faster that you should take advantage of.
Increasing your income is a great way to get the debt snowball moving faster. By increasing your income, you increase the amount that you can put to your debt! So take on a side hustle,work on getting that raise, or find another job with a higher paying salary.
You can also get that debt snowball rolling faster by decreasing expenses. Decreasing expenses allows for less to go to normal expenses, and more to go to your debt! You can move to cheaper housing, cut the cable, or stop eating out to put that extra to your debts!
Our Debt Snowball Story
Our debt snowball story started when we were first married. We only had student loans, but we had 4 total companies that we needed to pay back. Jacob’s private loan was first on the list as the smallest debt. Before our wedding, we knew we wanted to knock it out first.
When we came back from our honeymoon, we opened up all our wedding gifts. People we so generous with us and the money they gave us on our wedding day and we knew we wanted to use it wisely. So we put it straight to Jacob’s loan. That was the best thing we could do with our money that was going to impact us in the future.
So right away, our debt snowball was already running! We then started tackling our next debt, which was my private loan. We paid minimums on our other 2 loans and hit it hard on my private loan. By the time that we were paying our final loan, it was easy. And although it was the biggest, it took about the same amount of time–due to the large chunk we were able to toss at it every month.
The debt snowball really does work! We’re living proof! So if you haven’t already, get your debt snowball up and running. And watch that debt melt away.
Let Me Know In The Comments Below!
Did you use the debt snowball to pay off debt? If so, how did it work for you?