Getting Debt-Free Using The Debt Snowball Technique
Are you trying to become debt-free or at least trying to pay off some debt?
If so, I commend you for your financial effort. I am a firm believer in debt-free living.
My wife and I have been debt-free except for the mortgage for over a year now. We used the debt snowball technique popularized most recently by Dave Ramsey
The debt snowball works! It really does. I’ll share some of my experience and the experience of others in using it successfully to break free from the slavery of debt.
The advantages experienced from getting debt-free
Paying off all our debt has given us a sense of financial peace and security. We aren’t as afraid of the recession because we aren’t strapped for cash. In fact, we continue to live below our means since we paid off our last debt and we have some cash in the bank just in case.
As J.D. over at Get Rich Slowly points out in Free at Last! Saying Good-Bye to 20 Years of Debt, paying off your debt opens up your options in life. It gives you more freedom to pursue your desires.
After using the debt snowball technique to pay off all his debt, J.D. was able to quit his day job and become a full-time blogger! How awesome is that?
A brief overview of the debt snowball technique
The debt snowball technique is amazingly simple. It doesn’t take much time to explain, yet it is a powerful tool for taking charge of your financial situation and reducing your debt.
Here’s how the debt snowball works:
- List your debts from smallest to largest, but exclude your mortgage. Be thorough!
- Make minimum payments on all but the smallest debt to stay current.
- Pay the most you can on the smallest debt until it is paid off.
- Roll the total amount you were paying on the smallest debt into the payment on the next smallest. This builds your snowball as you move through the list.
For an example of how the snowball works and for more details, please see my article Back To Basics- Using The Debt Snowball To Pay Off Debt.
Problems you may encounter with your debt snowball
Anytime you try something new, you are going to encounter unfamiliar situations that you aren’t sure how to solve. Things may happen as you are paying off your debt that mess up your snowball.
Here are three common debt snowball issues and how to solve them:
1. Giving up and incurring more debt.
As I said earlier, the debt snowball is amazingly simple, yet it is not easy. It takes time, commitment and discipline. The snowball, when done correctly, is designed to maximum your chance of success, but there are a couple of things you need to do to help.
First, you have to stop the bleeding in order to heal the patient. You must stop incurring more debt! If you don’t, then you’ll lose traction, become demoralized and quit.
Second, be sure you stick to the debt snowball technique exactly. The debts are listed smallest to largest and attacked in that order because this method will ensure you have some early wins. Getting a few small bills paid off will give you the confidence that freedom from debt is possible. This is 80% mental and 20% method.
2. Letting an unexpected expense get you off track.
This happens to almost everyone that is trying to get out of debt. The key is to prepare properly. Dave Ramsey and many others suggest creating a baby emergency fund of at least $1,000 prior to starting the snowball.
The baby emergency fund will allow you to handle a lot of smaller emergencies or unexpected expenses without going into more debt. You simply use your emergency fund to pay the expense, temporarily suspend your snowball to replenish your emergency fund and then resume the snowball once you have $1,000 or more in the bank again.
3. The temptation to try a shortcut.
I won’t lie to you. Paying off debt sucks. Once it is paid off it is wonderful, but the process kind of stinks. You have to give up some things in the short-run in order to gain long-term financial success. For most, it takes 18 to 24 months to pay off all their debt except the mortgage.
Along the way, you are going to be tempted to take some shortcuts. You are going to see ads for places that will suggest they can help you reduce your debts to get them paid off faster. You are going to hear about debt consolidation loans that suggest they can solve your problem instantly.
Do not fall victim to these persuasive peddlers of instant gratification. Most of them will cost you more money and will not do anything for you that you can’t do for yourself! Stick to the debt snowball plan and you will succeed.
Getting debt-free is worth all the effort, trust me!
You will not be disappointed in becoming debt-free. It is a wonderful feeling of peace and security. This is one of the best things that you can do for your kids and family. They will learn from you and this will become part of your legacy. How great will it be to know that you changed the financial destiny of a large chunk of your family tree? Awesome!
Where are you at in your journey to becoming debt-free?
Photo by kamshots
We’re ‘debt-snowballing’ right now. It’s both exciting (because I know where we’re headed) and exhausting (working our butts off!). I can’t wait to write a “WE’RE DEBT FREE” post.
Read Nicki at Domestic Cents´s latest article – How To Make Homemade Bread
@Nicki – It is exiciting and exhausting, but it is worth it! I can’t wait to read your debt-free post.
I listen to Dave Ramsey’s radio show every Friday just so I can hear people scream they’re debt-free. Sometimes it chokes me up a little hearing the excitement and relief in their voices.
Thanks for the comment and good luck with your snowball!
Fortunately I have one debt only – a credit card. The bad news, I’m doing the starving artist thing so paying it off is not an option at the moment… Soon, soon…
Read Alex Fayle | Someday Syndrome´s latest article – Does procrastination arouse you?
I ran across your posting and was excited to see what you had to say. I have enjoyed reading Dave’s book and watching his show also. I have been pursuing the debt free lifestyle myself and enjoy hearing about others successes. I just started a blog myself. Check it out! http://moneylifedebt.blogspot.com/
Read RyansDad´s latest article – Recycle ??
So timely! My wife and I picked up the Total Money Makeover by Dave Ramsey 16 months ago and we just paid off our last credit card two weeks ago – I wept with joy (we owed about $20,000 dollars which was overwhelming). All we have left now is student loans!
Read Christopher´s latest article – One Man Helps the Disabled See the World
@Alex – You certainly have to have a decent income to pay down debt effectively. Hope the starving thing turns around soon!
@RyansDad – Thanks for visiting! Dave’s plan works. I am living testimony to that.
@Christopher – Wow! Sounds like you guys are well on your way to becoming debt-free. Paying off $20k is a fantastic feat!
Thanks for taking the time to comment!
@ Jeff – I’m really happy to hear about being debt free sans your mortgage.
@ Christopher – Congrats for paying off your credit cards. Very commendable!
I’m going to play the contrarian. I think it’s great that people want to get out of debt and be debt free. However, it’s good to remember that there is also good debt. For instance, if you are a real estate investor, debt is your best friend. Debt is the reason one of the major reasons why real estate investing is as powerful as it is today. Where else can you leverage your money to purchase something worth much greater than the amount of money you put into the deal? The bank isn’t going to give you a loan to buy a stock.
Great post!
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Good article. I love the prospect of getting out of debt… I enjoy writing about, I enjoy reading about, and most of all I enjoy DOING IT! My wife and I are “oh so close” to being free of our final non-mortgage debt and it is great. Just being free of all our other debt is quite liberating.
Thanks for sharing and encouraging the masses. Getting out of debt is critial to a secure and fulfiled life.
Dave
Read Do You Dave Ramsey?´s latest article – Focus, On What Is Yours?
[...] of my biggest complaints about debt snowball plans is that they usually begin before an adequate cushion is saved. After all, a $1,000 [...]
Thanks Jeff for the kind words. It’s important to share the examples, because I admit I was skeptical reading he testimonials in Dave’s books…but now here I am months later…sounding just like them!
Read Christopher´s latest article – Beautiful Examples of Animal Photography
[...] has good piece on the Debt Snowball over at My Super Charged [...]
The beauty of snowballing is that there is such a mental relief when something, anything hits a $0 balance that you just want to do the same thing with the next one. It takes a lot of patient to build the emergency fun to $1,000 and not be tempted to send it to a creditor. I am giving myself 3 years to get rid of at least 1/2 of my debt since it’s taken me a good 12 years to accumulate it.
Read Sandy´s latest article – Is A Savings Account Worth It?
[...] Getting Debt Free Using The Debt Snowball Technique My Super Posted by root 9 minutes ago (http://mysuperchargedlife.com) Are you trying to become debt free or at least trying to pay off some debt thanks for the comment and good luck with your snowball all rights reserved powered by wordpress wordpress themes Discuss | Bury | News | Getting Debt Free Using The Debt Snowball Technique My Super [...]
[...] Debt Snowball. Having a mountain of debt can leave you feeling discouraged. Implementing the debt snowball plan can give you hope as you take your baby steps towards financial [...]
[...] Getting Debt Free Using The Debt Snowball Technique My Super Posted by root 43 minutes ago (http://mysuperchargedlife.com) You are going to hear about debt consolidation loans that suggest they can solve your problem instantly thanks for the comment and good luck with your snowball nintendo nissan non profit non verbal nonconformist note all rights reserved powered by wordpre Discuss | Bury | News | Getting Debt Free Using The Debt Snowball Technique My Super [...]
[...] a meeting for one month from now. Our agenda at this meeting will be to review the budget, debt snowball and progress of the house [...]
Thank you for sharing this great overview of the Debt Snowball. My wife and I have been on Dave’s plan since 2003, and we are loving life on Baby Steps 4-6.
We talk often about how having a solid financial plan really enhances our relationship and our lives. Although my focus has been on other topics lately, sharing the financial aspects of a healthy marriage was one of my primary motivations for starting my own blog (going strong for around 3 weeks now)!
Dustin
EngagedMarriage.com
Dustin´s last blog ..Take 15 Minutes Each Day to Just be a Couple
[...] Debt Free with the Debt Snowball. My Super Charged Life is a cool blog aimed at helping you make the most out of life. This is an older article about using Dave Ramsey’s plan to get out of debt. Our family has used this method and the resulting financial freedom has definitely enhanced our marriage. [...]
[...] Debt Free with the Debt Snowball. My Super Charged Life is a cool blog aimed at helping you make the most out of life. This is an older article about using Dave Ramsey’s plan to get out of debt. Our family has used this method and the resulting financial freedom has definitely enhanced our marriage. [...]