In September, I plan on paying off some of my debt. I have a few bills that I want to have paid off before January. Here was my debt earlier this year –> My debt. Some of the amounts have gone down. A few have even gone up. I plan on doing the debt snowball to pay these bills off.
I learned about the debt snowball method while reading Dave Ramsey’s book “The Total Money Makeover“. The debt snowball is where you pay your debts from smallest to largest. You make the minimum payment for all of the debts except for the smallest. With the smallest debt, you pay the minimum and anything extra that you can afford. Once that debt is paid off you add the old minimum payment from the first debt to the second debt. As you continue this step with all your bills, you will see that you are applying more to each debt. That way you will get out of debt quicker.
Here is an example of the method
Here is a person with three debts. You see the minimum payment and the additional funds for payment.
Credit Card – $100 balance – $25 minimum per month
Loan A – $300 balance – $25 minimum per month
Loan B – $500 balance – $50 minimum per month
The person has an extra $25 per month to help with the repayment of debt.
The payments would look like this during the first two months of the debt snowball method
Credit Card – $25 minimum plus the $25 additional
Loan A – $25 minimum
Loan B – $50 minimum
The credit card was paid off after month 2. Here are the remaining balances on the loans.
Loan A -$175
Loan B – $350
This is what the payments would look like.
Loan A – $25 minimum per month + $50 (originally the payment for the credit card)
Loan B – $50 minimum per month
At the 6th month loan, A would be paid off. The $75 from that loan would then be added to loan B making the new monthly payment $125. By month 8 all of the debt would be paid off.
My debt snowball will take a couple years to complete. I will be in 2 weddings (September & January). Also, I have to save money for my New Year’s Eve trip. I want to be able to pay off my debt and still have some type of fun. I am dedicated to making it happen.
What ways have you paid off your debt? Did you use the debt snowball method or something else? Were you able to still do things while paying off debt?