We’ve progressed tremendously on our debt snowball since I first posted about using the debt snowball method to get out of debt. When we started using this method to pay off debt (very important for living a frugal, homesteading lifestyle), we owed more than $44,000 to banks, credit card companies, private student loans and a medical account.
Today, we only owe $10,700 (not including our mortgages) and we are counting down each week as we add extra to our smallest debt, as per the snowball method, which is my husband’s private college loan with a balance of just under $4,000.
Psychologically, bringing our total non-mortgage debt down to the $10k range has been a tremendous relief, as now our debt-free success story is almost written.
Paying off debt has also relaxed the tension and pressure in our budget since we have fewer debt payments and in case of necessity, can lower the debt snowball payment to pay for emergencies or unexpected needs.
Progress has often been slow; we welcomed a new baby in 2009, which meant paying for a midwife and buying a bigger vehicle (used, of course, and with cash). This spring, we are saving up for taxes as we expect to owe a few thousand dollars to the IRS come April.
After tax time, our debt snowball will resume in full force and I’ll be adding every extra dollar I can to the debt payments each month with the hope that we’ll be debt free by the end of the summer. I’m so thankful we found Dave Ramsey’s resources three years ago, in early 2007, attended his Financial Peace University program in August 2007, and have not taken on any new debt since that time, even when finances were tight and we had to make hard sacrifices along the way.
If you are struggling with debt payments and are sick of spending so much money on past purchases, it’s time to set up your own debt snowball. Here’s how.
- List your debts in order of amount, with the smallest debt at the top of the list.
- Note the minimum payment due to each debt, to the right of the debt amount.
- Create a budget, or consult your budget, to determine how much “extra,” above your minimum payments, you can spend to pay off debt every month. This is your “snowball” amount.
- Each month, make the minimum payments on all of your debts, except for the debt at the top of your list — this smallest one gets the minimum payment AND the debt snowball extra.
- Increase your snowball as much as you can each month. Add extra earnings, gift money, saved money form other categories, yard sale funds, anything you can, to increase how much debt principle you pay off when you make a payment toward that debt.
- After a debt is payed off, its minimum payment and the snowball are applied to the next smallest debt, month after month, until all debts are gone (except the mortgage) and you are debt free!
Are you working Dave Ramsey’s debt snowball plan? How is it going?
