Are you overwhelmed by financial debt? IBA Member Keegan Kraemer of The Debt Change Jar explains how to use the Dave Ramsey’s Snowball Method to pay it off strategically.
So I am sure that you have heard of the debt snowball method from the financial genius Dave Ramsey.
If not, allow me to give you a brief overview of what it is and how you can use it to pay off your debts!
If you are serious about paying off your debts and living a financially peaceful life, keep reading!
What in the World is a Debt Snowball?
In Dave Ramsey’s book, The Total Money Makeover he talks about 7 baby steps to paying off your debt and achieving financial bliss. The debt snowball is one of them. The debt snowball, in essence, is the prioritization of your debts from the smallest to the largest (you get the snowball reference now?). You start off with a certain amount that you can budget each month to pay off your debts. Whatever works for you. There is also a handy workbook to help you as you read through the book and keep you on track, which you can check out here!
You take all of your balances and pay the minimums, except the one with the lowest balance. That one you pay more to pay it off the quickest.
Once you have the smallest debt paid off, then you apply the balance you were paying on that one to the next smallest balance. You keep going in this fashion until off of your debts are paid off.
Using the debt snowball method you achieve a quick win, so to speak. If you have a debt with a lower balance and you see that you can fully pay it off, it will give you the satisfaction and motivation to keep going!
You are also focusing on using the extra money you have budgeted towards paying your debt off quicker. Otherwise, you end up spreading yourself thin and feel like you aren’t even making a dent in paying down your debts.
When you are achieving quick wins, you will be more likely to stick with whatever it is you are trying to do.
Think of it like losing weight. When you lose that first 5 or 10 pounds and you can see a change in the way you look and feel, that gives you the motivation to keep going.
Same thing with your debts. If you have a credit card with a $500 balance that you feel like you have been paying on FOREVER, wouldn’t it be great if you could pay it off in a few months and be done with it? Well Duh!Financial Debt doesn't have to rule your life. Learn to pay it down simply.
What if My Budget Doesn’t Allow Me to do This?
Well, when was the last time you really evaluated your budget? Be honest! If you haven’t already read the How to Stop Living Paycheck to Paycheck without Losing Your Sanity post, go read that first. Go ahead, I’ll wait…
Okay, now back to your concern about not having enough in your budget. Do you think you have enough now? There are always ways to cut expenses here and there. Whether it is not going out to eat or dropping that gym membership that you never use.
Take a good long look at where your money goes every month. Take a look at your bank statements, you might be horrendously surprised! When I first did this I had no Idea how much my husband was sending as the gas station on his “lunches” every week!
When you get lazy with your budget, things can start to add up really quickly.
So after you’re done crying over your bank statement, start cutting things out. Make sure everyone is on board. Eating out and entertainment costs are a great place to start.
Make sure you are really concentrating on your goals of paying off your debts when you do this. Don’t feel like you have to become a hermit just to become debt free. Try making a visual that you can keep with you or in plain sight as a reminder of your financial freedom goals. You know, like those giant thermometers that you see when people are fundraising.
After you are good with sticking to your new budget and have realized that it is not as bad as you thought it was going to be, take the next step.
… Read the rest of this post on The Daily Change Jar.
About Keegan Kraemer
Keegan blogs full-time at The Daily Change Jar, a site dedicated to empowering women to take control of their finances through frugal living and savvy side hustles. As a wife and mother of 5, she knows a thing or two about living frugally and making an extra income through side hustles. She is also working on a second blog to share her love of all things food! You can find her drooling over recipes at Foodie and the Fork.