Wahm Forum - Your "Work-at-Home Moms" Support Group

christina · Mon May 07, 2007 7:34 pm If you're in debt, have you tried the snowball method?

I learned this method many years ago, but just heard this term. Makes sense calling it the snowball method because that's exactly what you do - make a big financial snowball!

1. Make a list of all your debt from smallest to largest.
2. Make minimum payments on all your debts except for the smallest one.
3. Pay as much extra on that first smallest debt as you can every month until it is paid off.
4. Take the amount you were paying on the first debt and apply it to the second debt. Continue until the second debt is paid off.
5. Then take all that you were paying on the second and apply it to the third until it is paid off.

Here's a visual example...

Your list of debt

1. Medical Bill - $547
2. Loan from Parents - $650
3. Visa - $1,200
4. Mastercard - $4,800
5. American Express Platinum - $10,000
6. Vehicle - $22,000
7. Home - $249,000

Next steps

You take a look at your budget and realize that you've been spending money on music and video club memberships, driving through Starbucks and McDonald's and you have exercise equipment you aren't using that you could sell. So you cut out those "extras" and sell some items around the home.

1. You pay off that medical bill within two months and cross of your very first bill from the list. Congratulations on your financial success!

2. You were able to pay $250 a month on that medical bill so now you put that extra $250 on your loan from the parents. You hadn't been paying them anything so you feel REALLY good to get that personal loan taken care of.

3. By now you've gotten use to watching every dollar you're spending and have an extra $325 a month to put toward your Visa balance that cost you about $39/month. You pay $364/month on your Visa. Within a few months you've got your Visa paid OFF! WOO HOOO You are seriously on a roll now!

4. Now you put that $364 toward your Mastercard that cost you $118/mo. Your total payment on Mastercard each month is now $482. You do that for several months until your Mastercard is paid off. Score another financial victory for YOU! You are awesome and feeling more free than ever!

5. Next you tackle American Express and continue the snowball process.

Repeat the paying off and adding it to the next bill payment until you are completely debt free! Take a minute, close your eyes and think about how you feel when you pay off that last debt. Feels good doesn't it? No, wait. It feels GREAT!

wahmannounce · Mon May 07, 2007 8:26 pm

Christina,

You've share a very clear concept of paying off your debts. And I bet by paying off your smaller ones first, you will begin to thrive on that feeling of success which will motivate you to get the bigger ones paid off as well.

I can tell you it feels so great now that we've achieved paying off all of our debts!

Anyone with credit card debts really needs to take the first step by cutting them in half with the scissors and tossing them in the trash. You'll never get rid of debt until you learn to live within your own means.

Thanks again for sharing your article.

christina · Mon May 07, 2007 8:38 pm

wahmannounce wrote: Christina,

You've share a very clear concept of paying off your debts. And I bet by paying off your smaller ones first, you will begin to thrive on that feeling of success which will motivate you to get the bigger ones paid off as well.

Exactly. :wink:

Marlo Boux · Wed May 09, 2007 8:16 pm

I love this, thanks for sharing. We paid off all credit cards and cancelled all but 2 between hubby and me. They are hidden and not carried in our wallets :) and have no balance owing.

good info!

christina · Wed May 09, 2007 8:37 pm

Awesome, Marlo! A huge congrats to you and your hubby!!