If you are reading this post, you have decided that you are ready to eliminate your debt. You are about to tackle all your debt, one loan at a time. This is so awesome!
The debt snowball method has been the key to my family successfully paying off debt.
We are a testament to the fact that this debt snowball method really does work. If my family can do it, I know your family can too. Keep reading as I share how to eliminate your debt fast with a simple, clear, and effective plan of attack.
Debt Snowball Method
Let me give you a simple illustration of how it works. A huge snow storm just occurred in your neighborhood that is situated in a mountainous elevation. Your neighborhood is the prime location for kids to make huge snowballs after a heavy snowstorm.
Imagine taking your kids outside to make a huge snowball. You find a high hill that your family is eager to roll the snowball down.
As the snowball begins to roll down the hill, it automatically picks up more snow and grows larger by the second.
This is the exact method that happens with the debt snowball. You start by paying off debt in a certain order. I have found this method to be great if you want to eliminate your debt fast.
You start by eliminating each debt one at a time. Then you take the minimum payments that you were paying on your previous debt and add it to create larger payments for your remaining debt.
Eventually, you are left with only one debt. You will take all your minimum payments from previous debt and add it to your remaining debt until it vanishes.
The Steps to Getting Started
- You will need to write or type a list of all your debts. You will list them from the smallest debt to largest debt. You do not need to concentrate on minimum payments or interests just the total balance.
- Now you will begin by paying the minimum payment on each loan or credit card. If you have any extra cash flow put that full amount towards your smallest debt.
- Now it is time to get creative by finding extra money. You can do this by working a part-time job, tightening up your budget, or sell things that you no longer use or need. All of this extra cash would need to go towards your smallest debt.
- Now you are at the point where you are starting to pay off your smallest debts. You will need to take the monthly payments from the eliminated debt and add it to your next smallest debt.
- This is the rinse and repeat step where you keep the process rolling until you only have one debt left.
Inspired By “Paid in Full”
The debt snowball method is a great way to pay off debt. This method allows your behavior to change regarding your debt. Some may ask why should I pay the smallest debt off first?
When you see progress on your smallest loans it gives you the necessary fire to keep pushing forward. It’s the small victories that win the race. I remember the feeling when we saw our first credit card paid off it was a feeling of total freedom.
We knew we had more to tackle but that first hurdle gave us motivation and drive that we honestly didn’t know we had. At this point, we were on a mission to crush our debt.
Now to the fun part. We have extra money to pay for our next credit card. This allowed us to see it vanish a lot quicker which gave us jet fuel to know that this debt elimination myth was real.
As we kept seeing decreases in our loan balance, we were more conscious to pay extra money to get rid of it faster.
Earlier I told you to pay off your smallest debts regardless of the interest rates on your higher loans. Debt is really emotional just like weight loss. You need victories to keep going.
For example, you are trying to lose weight.
You have not been eating sugar and carbs for two weeks, but the scale is not moving. You go into the grocery store and the smell of the bakery makes you wonder if eliminating sugar really matters.
You have been sacrificing daily not eating foods you enjoy, and you really don’t see any progress on the scale. You might be able to slide into your jeans a little further, but the scale doesn’t give you any motivation to keep going.
The same happens with your debt. You know mathematically paying off the loan with the highest interest rate makes better sense logically. However, emotionally you really want to see your debt eliminated.
Let’s be honest we all love wins. A small win keeps gives you enough motivation to keep going.
If that scale would have just moved down one pound you wouldn’t have eaten that slice of lemon pound cake from your local grocery store. This is why the debt snowball method is great because you are winning along the way to keep you inspired.
How to Push Forward When You Want to Quit?
- I can’t stress this point enough. You cannot spend more money because you eliminated your smallest debt. I know this will sound clique but as humans we love to celebrate our victories, right? It’s only fair that we should. Don’t let this stop your momentum by spending unnecessary money. Find another way to celebrate. Celebrate by sharing with your friends and family how you are on the road to total debt elimination.
- I made this mistake several times when I would receive bonuses or raises on my full-time job. When you receive more money don’t increase your standard of living. Once you start eliminating debt it is very tempting to want to spend the extra money. You should act as if the money doesn’t exist. It’s hard but you have to stay strong and committed to the journey. Remember extra money should go toward your smallest remaining debt.
- You need to create a budget if you don’t already have one. It is a blueprint for your cash flow. A budget allows you to have control of your money. You will budget will show you everything you spend money on, and it will help you eliminate unnecessary spending habits.
- Keep a record of how things are going. I created a journal to keep track of our road to a debt-free life. This journal is a constant reminder of how far we have come. We have accomplished so much since the beginning. We are proud of our accomplishments and glad we said yes to the process.
- Have you ever heard the saying “just trust the system? Why? Because it works. You only need to listen to people that will encourage you to keep moving forward. If they don’t it’s fine because it’s your debt. Plus, you can always ask if they are willing to pitch in to help you achieve results faster. I doubt that, so don’t listen to others who might discourage you. No one will have to motivate you, once you see the words “paid in full”. It will be the only inspiration you need to keep going.
Are you ready to sit down and start climbing your way out of debt by using the debt snowball method?