Debt Snowball - A Proven Strategy for Paying Off Debt FAST!

By Anna D. Banks

A Proven Strategy for Paying Off Debt FAST!

The Debt Snowball is the most talked about strategy for paying off debt fast. That's because it works. It's recommended by recognized financial expert Dave Ramsey and other financial gurus.

How the Debt Snowball Works

List all of your debts, in descending order by balance, regardless of the interest rate (accounts with smallest balance first).

Determine the most money you can make available from your budget to apply to the debt snowball. The more you can apply, the more money you'll save and the faster you'll pay off your debt.

Each month, apply the minimum payment PLUS the extra money you've made available from your budget to the first debt (the one with the smallest balance). On all your other debts, pay only the minimum payment. Continue to do this until the first debt on the list is paid off.

Take the minimum payment AND the extra payment you were making on the first debt and add them to the minimum payment you've been paying on the second debt. Pay that amount on the second debt each month until it's paid off, then move on to the third debt. Continue to pay only the minimum payment on all debts except the one you're "snowballing."

Repeat this process until all of the debts are paid off.

It will not take long before the payment you're making on the targeted debt becomes quite large, as you add the payments you were making to all the other accounts (that you've now paid off) to the payment on the debt you're now focusing on. Your cash flow remains the same throughout the process but the monthly payment you make to the targeted debt grows larger and larger.

Several Web sites provide online Snowball calculators so you can see for yourself how the Snowball would work for you. The Snowball Calculator allows you to enter up to 20 debts and will show you which debts to pay off first, and the amount of the payments. The Debt Snowball Calculator allows you to order your debt in several different ways to see you much you'd save under each method.

Many people have raved as to how well the Debt Snowball works. It just takes commitment to being debt free. As Dave Ramsey says, "if you can live like no one else, later, you can live like no one else!"

FPU Lesson 4: Dumping Debt.

By Anna D. Banks

In Lesson 4, Dave Ramsey gives us a plan for getting out of debt and also staying out of debt.

Most of us know, first hand, that debt destroys, marriages, families, friendships, communities and even countries. However, the statistics that Dave shared are positively frightening:

• 25% of American families have a NEGATIVE net worth now


• more young adults file bankruptcy than graduate college now


• colleges lose more students due to massive debt loads than academic failures


• last year credit card companies collected $90 BILLION in penalty fees alone


• last year, credit card companies reported profits of over $150 BILLION

Steps to getting out of debt:

1. Quit borrowing more money. Don’t take on any more debt.


2. Cut up credit cards. Go cold turkey. Credit cards can mess up your budget on many levels.


3. Sell stuff. Go crazy. You have way more than you need or use anyway.


4. Get an extra job. Take side jobs to accelerate paying off your debts. This can be temporary.


5. Debt snowball. Pay off the lowest debt first, then use the amount you were paying for that debt and roll it over to the next debt.


6. The debt snowball debt reduction plan is one of the best plans available for paying off debt. It helps people to see immediate results and gain momentum in their plan to be debt free.


7. Go ahead and start your own debt snowball reduction plan and begin your journey toward financial freedom and financial peace.

Praise Reports:

• All families have started saving toward Baby Step 1 – $1,000 Emergency Fund.


• More than ten families have completed Baby Step 1 - $1,000 in the Emergency Fund


• One family has fully funded Baby Step 3, having SIX months living expenses in the Emergency Fund.


• Six families cut up their credit cards - 10-12 cards in total!


• It was especially exciting when the rest of the class began applauding after each family’s “plasectomy”.

Next week: Lesson 5 -

Credit Sharks in Suits...Understanding Credit Bureaus & Collection Practices