How our Journey to Pay Down Debt Began
A few years ago, my husband and I were drowning in debt, living paycheck to paycheck, and regularly overdrawing our bank account. We were feeling hopeless with the weight that our overwhelming debt was putting on our shoulders, and I knew we had to do something to get out of debt! However, I honestly did not know where or even how to start. I felt like we were so far into debt, that we would never be able to even make a dent in what we owed!
My sister knew that we were struggling and she introduced us to Dave Ramsey by giving us his book, The Total Money Makeover. This book totally changed my mindset about money and gave us a plan to begin our journey to pay down debt and start saving for the future. I went from feeling hopeless and overwhelmed about our debt, to feeling empowered and full of hope! If you are in a similar situation and desperately want to pay down debt, I urge you to check out this book! It just may change your outlook, exactly like it did for me!
In The Total Money Makeover, Dave Ramsey provides baby steps to starting an emergency fund and paying down debt. He recommends the Snowball Method for getting out of debt, however there are pros and cons to this method that have to be considered based on your personality and focus. One thing is for sure though, if you follow the steps in the Snowball Method, you will get out of debt!
Once you know the steps to begin, go ahead and get going. Getting started is always the hardest part!
The Debt Snowball Method to Pay Down Debt
The theory behind the Debt Snowball method is that paying off your debt with the smallest balance first will give you the greatest motivation to keep going!
To get started, list your debts in order with the smallest balance first to your largest balance last (don’t worry about interest rates unless two debts have similar balances — in that case, list the one with the highest interest rate first). Leave your mortgage off of the list!
Next, you will need to figure out how much money you have each month to put towards your debts.
Pay as much as you can towards the smallest balance and only pay the minimum payments on all of your other balances.
When the smallest balance is paid in full (wooohooo!), use the money you were paying towards the smallest balance (that is now paid off) and add it to the next balance on your list. Let’s say you were paying $200 a month towards your smallest balance every month and the next balance on your list had a minimum payment of $25 a month. When the first balance is paid off, you would add that $200 to the $25 minimum payment that you were paying and so on. Every time a debt is paid off, you add that payment to the next balance on your list.
Pros of the Debt Snowball Method
- Compounding payments towards the smallest balances leads to quick wins.
- Seeing your efforts produce rapid results helps to keep motivation levels high.
- Fast results mean you are more likely to stick with the plan.
Cons of the Debt Snowball Method
- The Snowball Method may take longer and end up costing you more money than other methods of paying down debt (such as paying the balances with the highest interest rate first).
- Prioritizes quick wins instead of over-all savings.
How do you know if the Debt Snowball Method is right for you?
If you need early successes to help motivate you to keep going, your debts have varying balances, and you are not the best at sticking with plans, then the Debt Snowball method is probably right for you! Those quick wins are so motivating because they show you how good it feels to pay down debt!
If you are just getting started with budgeting and paying off your debts or if you feel hopeless about your money situation, I can’t recommend The Total Money Makeover enough. It literally changed my entire mindset about money and gave me the information I needed to start on my journey to be debt-free!
If you are feeling lost and hopeless when it comes to your financial situation, reading this book is such a great place to start. No matter how far in debt you are, don’t lose hope and don’t give up! You can do this!
Have you read The Total Money Makeover? Let me know what you think about it!
This post may contain affiliate links. Read our full disclosure here.