If you are upside down in your finances and want to get out of debt, summertime is a perfect time to start with a snowflake, roll it into a snowball and melt your debt.
The debt snowball is not a new idea. Money gurus have been teaching it for years as a great way to get out of debt. Dave Ramsey is my favorite guru, he is real and halarious. I like to be surrounded with people who are real, so we used his plan to get out of debt. Here’s how it works.
Let’s take the Jones as an example. Remember them? They had $20,000 in credit card debt, on five different credit cards, and totalled $600 in payments every month. The only other debt they had (besides the house) was on their cars. They owe $14,500 on one and $19,000 on the other. (They will have to sell one, but that’s another story.)
They would take there smallest debt first and kill it. Then roll that payment into the next one and kill it. Then take those two payments and attack the third. When you start with a snowflake and roll it, it gets bigger. The debt snowball is no different. Cool, huh?
Here’s what their monthly payments would look like on a debt snowball..
Company Total Payoff Minumun Payment New Payment
Chase $1600 $50 $500
Discover $2600 $75 $75
American Express $4200 $125 $125
Victoria Secrets $5000 $150 $150
Lowes $6600 $200 $200
Then you take $500 + 75=$575 do the hokey pokey and you turn yourself around…and after three months, it would look like this…
Company Total Payoff Minimun Payment New Payment
Chase $1600 $50 $500
Discover $2400 $75 $575
American Express $3900 $125 $125
Victoria Secrets $4500 $150 $150
Lowes $6000 $200 $200
Put $575+125=$700 in and you shake it all about…do the hokey pokey and you turn yourself around and infour more months it would look like this…
Company Total Payoff Minimun Payment New Payment
Chase $1600 $50 $500
Discover $2600 $75 $575
American Express $3400 $125 $700
Victoria Secrets $4600 $150 $150
Lowes $5200 $200 $200
…do the hokey pokey…do the hokey pokey…In five more months it would look like this…
Company Total Payoff Minimum Payment New Payment
Chase $1600 $50 $500
Discover $2600 $75 $575
American Express $3400 $125 $700
Victoria Secrets $3800 $150 $850
Lowes $4300 $200 $200
Well…You get the idea. In 19-20 months the Jones could have there credit cards paid off, if they sold a car and bought a “I’m getting out of debt beater.” If one of them picked up some over time or a second job and cut some expenses, they could probably be out of debt in two to two and a half years. Keep in mind, if you are going to win with your finances, you may have to sacrifice.
That’s what it’s all about!
Let me tell you how that feels win you start winning with money.
It feels like snow that won’t melt in the summertime.
What are you waiting for? Get your baby emergency fund in the bank ($1000) and get your debt snowball rolling.
Simply,
Sis
LOL. Great picture!
And snowballing is a great way to go! Its also important to remember that when your debt decreases on your bills… to still pay the original payment and not the newly decreased payment.