Debt Snowball. This is the quickest way to get out from under all that debt. Again, there is a form in the back of the book that explains this also, but here’s the gist of it. Write out all your debts, from the smallest amount to the largest. Don’t worry about interest rates here because what we want to do is pick up momentum as we get rid of each individual debt. Remember this is about changing our behaviors. He says, “You need some quick wins or you will lose steam and get discouraged.” (p100) Mr Ramsey calls this “the Debt Snowball,” so let’s get the image in our minds of a small ball of snow rolling down a hill and picking up more snow along the way, getting bigger and bigger as it rolls downhill. No, our debt doesn’t get bigger, but the amount of money we throw at that debt does.
Here’s how it works. Along with the list we just wrote out with all our debts, smallest to largest, we also write the minimum amount that is due on each one, each month, because this has to be paid and should be part of your monthly budget. So when we pay off the smallest debt, we add that debt’s minimum payment to the next debt’s minimum payment, and we are putting more funds into getting rid of that second debt, see? These minimum payments are already spoken for in your Monthly Cash Flow Plan, so just keep pouring that amount into getting out of debt and do not use those funds for anything else. He says, “Every time you knock out a debt, you take the money you were throwing at it, along with any other cash, you can squeeze out of the budget, and move onto the next one. So as you work down the list, you have more money to apply to each debt.” (p100)
Maybe an example is the best way to explain it. Let’s say the first debt you have is for a lab called Diagnostics and you owe $50 to them with a minimum monthly payment if $10. Now let’s say, you were able to sell something on eBay and made a quick 50 bucks so you could pay off that first charge. The $10 minimum payment then gets added to the next debt. So let’s say the next debt is a $460 medical bill and that one’s minimum payment was $38 per month…now you add the $10 from the one you just paid, giving you $48 ($38+10= $48) to put towards this one which helps you pay it off quicker. If you do nothing extra, which you should, in a little less than 10 months that second debt will be gone too, and you will add those $48 to the next minimum. Once more, let’s say you owe $770 on your Home Depot card, with minimum payment of $45. You add the $48 from the paid debt of the medical bill to this and now you are paying $93 ($48+45= $93) each month on this debt…and so on it goes. Again, if you have any questions, please contact me, as I would love to help you understand this, and gain traction, so that you can be free from these burdens.
2023’s Got A Minute? Book Club
January: The First & Best Book Ever: The Bible
February: Love Is In the Air: “The 5 Love Languages: The Secret to Love That Lasts” by Gary Chapman
March: Spring Growth: “Secrets of the Vine” by Bruce Wilkinson
April: Living the Resurrected Life: “The Wonderful Spirit Filled Life” by Dr Charles Stanley
May: My Spiritual Mom: “Making Good Habits Breaking Bad Habits” by Joyce Meyer
June: Spiritual Dad: “It’s Not About Me- Rescue from the Life We Thought Would Make Us Happy” by Max Lucado
July: Financial Freedom “Complete Guide to Money” by Dave Ramsey
<>< Peace, Diane
