Step Four...Debt Snowball

So by now you have created a budget, you're using the cash envelope system, and you have or you are working on saving $1,000. So let's tackle our debts now. This would consist of credit cards, car loans, and student loans. In Dave Rasmey's "Seven Baby Steps" Step Number Two is The Debt Snowball: Lose Weight Fast, Really.

Directly from Dave Rasmey, the creator of the debt snowball, are the instructions on how to do it. 

• The debt snowball method requires you to list all your debts in order of smallest payoff balance to largest. 
• List all your debts except your home; which is discussed in a later step. 
• List all of your debts - even loans from mom and dad or debts with zero percent interest. 
• List the debts smallest to largest - don't worry about the interest rates. 
• The reason you list them smallest to largest is to have some quick wins - which will get you more excited and keep you on track. 
• After you list the debts smallest to largest, pay the minimum payment to stay current on all debts except the smallest. You are going to take every dollar you can find and pay it towards the smallest debt unit it is paid off. 
• Once you pay the smallest one off then you go to the next smallest debt and do the same thing over an over. 

Below is an example to visually see what I am talking about: 

So as you can see moment starts to grow with each debt getting paid off. Then before you know it you are debt free!

But the key to any battle is to identify the enemy. Can you guess who the enemy is? It's all the creditor out there that get us on the ideas of buying now and paying later or for only x a month it can be yours or zero percent interest is same as cash. Those nasty sneaky people but we are also to blame because we fall for it. But it stops now! Let's pay off all these debts and never look back. 

There is one more enemy we need to talk about before we can be successful on this method...yourself. According to Dave Rasmey, "personal finance is 80 percent behavior and 20 percent head knowledge." So if we don't modify our current behaviors then the debt snowball method will never work for you. You need to be dedicated to paying off your debts and at the same time not taking on any more debts. So can you make a promise to yourself that you are going to do whatever it takes to get out of debt and that you are not going to create any more debt? If you answered "yes" to both questions above then you are ready! If you only said "yes" to one of the questions or said "no" to both then this will never work for you and you'll probably stay in debt forever. 

So the way out of debt is to outmaneuver the enemy and run your life. So get gazelle-intensity on getting out of debt. For some people it might only take a few month months and other a few years to get out of debt. It will be challenging at time but I promise once you are out of debt you will feel relieved. You will also find you have a lot more money then you think. Which then the fun begins. 

Dave ends step two with saying the following which I think is very powerful!

"The Debit Snowball is very possibly the most important step for two reasons. One, you free up your most powerful wealth-building tool, your income, during this step. Two, you take on the entire American culture by declaring war on debt. By paying off your debt, you make the statement about your stance on the issue of debt." 

Here's to getting finiancially fit AND getting out of debt once and for all!! 

Rustie J