Debt Snowball

 

How does debt happen? I think it's just something that is such a normalcy it makes me think, does anyone really think twice about opening a credit card and then unfortunately for some of us become overwhelmed with the amount we've accumulated? I know this is not everyone, but I know from my personal experience it does happen to more people then we might think. For me personally I did open a credit card as soon as I turned 18 and thankfully I did accumulate some debt over the last 10 years, but I have been fortunate enough to not be TOO out of control. I do have some debt that will take me some time to pay off, but nothing that is not possible. I've decided to share what I'm doing personally to help myself out which includes the following Dave Ramsey's Debt Snowball method. So stick around if you're interested!

1: List Your Debts

As you might have seen from previous posts, I'm a planner girl so this first step was a necessity for me. I took a new page from my personal planner and listed my debt (i.e. credit cards, car, home loan) in order from smallest to largest. What I've done personally is use the hexagon stickers (as you can see above. find these here) to mark the total amounts. For different cards or loans they represent different amounts, but I have a key next to each item. As I've mentioned before, I am a visual person. I need to see these items to really focus on my goals as well as my progress. I create a new list monthly and with this process I can see where I stand month to month. I can't lie, it looks intimidating seeing it all out there with all these colorful hexagons, but I can say from my experience, every month (I do create a new list every month with the updated amounts) when I get to see where I started and where I'm at now I do feel pretty accomplished.

2: Make Minimum Payments, Except for Smallest

The main difference from Dave Ramsey's plans versus others I've researched is to start from low to high as far as making payments. His main advice is to ignore interest rates and really only focus on the amounts owed and start with your lowest amount due. When I was younger I was told to focus on cards with high interest and focus less on the lower rates. That advice does make sense to me, BUT it feels very overwhelming. especially if you do owe some money. When I was following these steps I was never able to pay off anything in full, this left me feeling overwhelmed and unaccomplished, now granted I was 19 and didn't have a whole lot of money to begin with, but still.

 

3. Pay as much as possible on Smallest

Tying into step 2, pay as much as possible on your smallest loan/credit card. For me, this step is what sold me on trying this process. This allows you to actually accomplish something from month to month. What I've been doing for the past few months is making the minimum payments on all loans (including the smallest). Once all of my other bills have been paid for the month I then figure out how much more I can sacrifice and pay this amount onto my smallest debt. By completing these steps I have had less in the bank each month, but if you have a lot of debt is it worth it to have the money in your checking account while still accumulating cost on your cards or loans?

Step 2 and 3 are my personal favorite steps (really for a silly reason). As I explained above how I show my debt I use stickers (I know, I'm 5), but because this is the way that works best for me to view and focus on my goals following the debt snowball process I get to actually see my progress. Specifically, by following the above mentioned steps I get to see the big changes with my month to month which my balances.

4. Repeat!

Now the easiest step, once you're paid off you lowest loan/card move on to the second lowest and keep on going! I know it might seem silly, but for me this really worked. In March, I paid off two out of four cards! I think when I first read over this process it seemed easy enough and I decided to try it, and to my surprise it worked! Two cards are now fully paid off!

I hope this helped, and maybe broke down the steps to be a little more user friendly? I know sometimes when we try to do these adult things it seems way harder then it needs to be. Please let me know if you have any questions or if I can just give you a pep talk, because I know we all need it sometimes!