How to Not get Crushed by the Debt Snowball Method

The debt snowball method can save your savings…if you don’t get stuck

Dave Ramsey’s 7 Baby Steps are helpful to get out of debt, but sometimes they can be challenging — especially Step 2: the debt snowball method.

My wife, Wendi, and I seem to be in a never-ending battle with it.

If you are like us and are struggling with the debt snowball, there is good news: You can overcome.

If you’re unfamiliar with the debt snowball, it gets its name from when you are building a snowman. You start with a small snowball and start rolling it around in the snow. Pretty soon, the snowball starts getting bigger and bigger.

The debt snowball method is a way to eliminate your debt, and it follows a similar pattern. You pay off your small credit obligations first, and then you attack the bigger ones with additional resources. We’ll talk about this more in a bit, but it’s a great way to pay down debt.

You will be amazed at how quickly you can erase debt, especially those credit cards.

We haven’t yet eliminated our debt, though we have seen friends and family crush theirs. The reality is life happens. While we have not been able to erase our debt in nine years, we’ve managed to thrive following Dave Ramsey’s 7 Baby Steps.

We are confident you can do the same, even if it means taking baby steps with Dave Ramsey’s 7 Baby Steps. The reality is you can make progress, even if you have difficulty following the steps exactly.

Don’t let that be a deterrent because you will be better off in the end.

This post is the second of eight sharing the real-life experiences of two readers as they work through the Dave Ramsey Baby Steps and Total Money Makeover. I’ve met so many people that have seen their finances saved by the Baby Steps, I wanted to share this series and some great ideas to put your personal finances back on track.

Get Started with Baby Step #1 and 5 Steps to Start Your Emergency Fund

Sometimes I feel like we get snowballed by the debt snowball

If you already have your emergency fund or are in the process of building it, Ramsey’s advice is to not take on any new debt and start getting rid of the debt you have now. Whenever you pay off one credit card or loan, you use the money from what you were paying on the paid loan and apply it to your next larger credit card or loan payment.

He calls this a snowball because you pay off your smallest obligation first and proceed to the next one and the next one and the next one.

Whenever you pay off an obligation, that amount is applied to your next bill. If you were paying $25 a month on Payment 1 and $35 a month on Payment 2, once the first debt is eliminated, you will now be paying $60 a month on Payment 2.

Ramsey advises you not overthink things by calculating interest charges or the debt avalanche method. Instead, look for small victories by eliminating the smallest debt first.

We’ve been stuck in the debt snowball, but

A common phrase out of Dave Ramsey is “Beans and rice, rice and beans.”

What he’s conveying in that message is to stop going out to eat and to forgo a lavish lifestyle in order to get serious about getting out of debt — no vacations and no new cars.

The focus here is to get rid of all debt except for the mortgage. We did pretty good with credit card debt, but we got hung up with Wendi’s student loans. She graciously suggested we knock out my student loans first.

We have been stuck in the debt snowball, and it is due in a large part, to my unwillingness to be laser-focused on the second of the baby steps. By that I mean, it hasn’t always been beans and rice.

We take vacations every year. The fact is my aging mother lives in the Boston area, and I live in Northeast Ohio. We only get up to see her once a year, and I am not going to delay seeing my mother until I get out of debt.

I always say, “If Dave Ramsey wants to pay my bills, he can tell me what to do with my money.”

Along the way, we have helped family, friends and strangers dealing with financial hardships. We have had to pay for a new roof, replace two cars, get a new water heater, a new heating and cooling systems, thousands and thousands of dollars in car repairs, and all of this on top of the normal expenses of life.

Despite this, Wendi and I have some good news to share.

The debt snowball principles works, even in the difficult times

Even though we aren’t “crushing it,” and even though we have seen others follow the baby steps successfully, we are in a much better place financially because of Dave Ramsey’s principles.

They work.

Through all of the expenses and the emergencies we have encountered, other than when we replaced our cars (we drive them into the ground; we have no idea what trade-in value means) and took out loans (which we paid off years early), we did not get further in debt.

Every one of our vacations is paid for. We budget the entire year, so we set aside money for our trips months before we depart. While we still have a student loan and a mortgage, we have no other debt.

We don’t live paycheck-to-paycheck.

If you are struggling with the debt snowball, try these things

Stick with the plan: Be sure to commit the same amount to debt every month. If you have $1,000 in payments each month, make sure you pay at least that much when you eliminate a $100 credit card payment.
Increase the amount you pay whenever possible: Got a raise at work? Apply it to debt. What, you received a holiday bonus? Attack your debt or put it in your emergency fund. If you get a new job and make more money, then put more money toward getting out of debt.
Don’t take on new debt: You will never get out of debt or gain control over your finances if you continue to go further into debt. Be sure to do a budget every month and follow it. Avoid new debt to the best of your ability.

Understanding the Debt Snowball Method

The debt snowball method is a popular strategy for paying off debt. It was created by financial guru Dave Ramsey and has been featured in his book The Total Money Makeover. The basic premise of the debt snowball method is to pay off your debts in order of smallest to largest, regardless of the interest rate.

When you start using the debt snowball method, you will need to create a budget and list your debts from smallest to largest. You should make minimum payments on all of your debts except the smallest one. For the smallest debt, you should make extra payments until it is paid off. Once the small debt is paid off, take the money that you were using to pay it off and add it to the minimum payment for the next debt. Continue this method for all of your debts and eventually, you will pay off all of your debt.

Although it may seem counter-intuitive to apply this strategy if the smaller debt has a higher interest rate than other debts, this method works because it encourages greater motivation by rewarding earlier success. Also, financial experts believe that people should be motivated to get out of debt as quickly as possible rather than watch their money be eaten up by interest payments for a long time.

Once a person has a debt paid off, their motivation level increases and they are more likely to stick with the program. A budget is also necessary for this method to work properly because otherwise, people would be tempted to spend their extra money on non-debt related expenses.

The debt snowball method can be an effective way of paying off debt as long as it is accompanied by some self-control and discipline. However, financial experts agree that no matter which method you use for getting out of debt, one important factor is only spending below your means.

The reality of following just the first two Baby Steps

Because we follow Dave Ramsey’s 7 Baby Steps to the best of our abilities, we are in a much better financial position. In January 2018, I was able to launch a new digital marketing business. We had seed money to start it, and it has been a successful venture so far.

Truth be told, the first two steps changed our world.

We have an emergency fund with about $3,000 (we try to add to it here and there), but we also have what Mary Hunt calls a freedom account. This is where we put money in consistently to cover household repairs, car repairs, vacations, gifts, etc. This fund allows us to be proactive in preparing for unexpected emergencies without having to touch our emergency fund.

We hope you are able to change your financial position. It is so freeing not having to worry about whether there is enough food in the fridge or gas in the car to make it to payday.

There are going to be ups and downs as you try to make a better life for you and your family. If you start and follow the plan you will be further along than if you just sit on the couch. What are you waiting for?

Read the Entire Crush Your Debt Series

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