Dave Ramsey’s Debt Snowball: Paying Off Debt (Credit Cards, Student Loans, & Other Non-Mortgage)

Hi, I'm Kelly from FreebieFindingMomcom and today we're going to talk about the debt snowball method It's basically a debt reduction approach that's become popular

Thanks to finance guru Dave Ramsey Now he calls it the debt snowball Method because like when you were a kid and you were building a snowball you pack the snow as tight as you could Roll it across the yard and then would gain momentum and get larger and larger in Relationship to debt as you pay off your non word related debts You should be getting momentum as you go Which is why he recommends paying off your smaller debts first and then proceeding towards your larger debts Now you might be thinking should I pay off my higher interest rate debts first? Technically Yes, you should if you want to spend the least amount of money But what Dave Ramsey found is that people don't typically do that He found that personal finances are driven 80 percent by behavior and only about 20% by the math Which is why he recommends starting with your smallest debts first and then proceeding towards your larger debts Because once you've seen that you have been able to pay off your smallest debts and have been successful You're more inclined to stick to his approach to use the debt snowball method You're going to start by listing all of your debts from smallest to largest and paying the minimum monthly payment on these debts except for your smallest debt for that debt You're gonna pay as much as you possibly can So you're gonna try to raise some additional funds to pay off that debt as soon as possible so somehow Someway you're to come up with some additional funds to pay off that smallest debt Whether that means taking on another job whether that means reducing your expenses or both But you're gonna want to get that smallest debt paid off as fast as possible Then you're going to repeat the process until you've paid off all of your debts in full Now, let me show you the debt snowball method in action But first if you will give this video a thumbs up be sure to click subscribe to my YouTube and Follow me on instagram as you can see I have listed all of your debts from smallest to largest Along with the interest rate the minimum payment and the total owed now, let's say you've been able to raise an additional $250 that you can put towards your debts every single month above your minimum payment We're to use those funds to pay off your smallest debt first Let's look at the new payment column as you can see for the cold credit card You've been paying your minimum payment of $30 Now you have that additional 250 dollars that you can put towards that balance so now you can make a monthly payment of 280 dollars by making it 280 dollar payment You'll have your Costa credit card paid off in just two months You'll then proceed to going to your lowest credit card Once your Cowles has been paid off You're going to continue making that monthly $50 minimum payment But now you have that two hundred and eighty dollars That you were putting towards your Kohl's credit card that now you can put towards your lowest balance So now you can make a total payment of three hundred and thirty dollars on your Lowe's credit card With a three hundred and thirty dollar monthly payment

You can have your Lowe's credit card paid off in just two months as well You'll then proceed with paying off the rest of your debts Just like you did your clothes near Lowe's fringes the target You'll continue with that $50 minimum monthly payment You'll add that three hundred and thirty dollars that you were using on your Lowe's credit card you'll add that together for a total of three hundred and eighty dollar monthly payment towards paying off your target balance and You'll have that target balance paid off in just three months Then proceed with paying off all the rest of your debts Exactly the same way until you made your final payment on your student loan debt in total You'll be able to pay off all of these debts in about twenty six months or a little bit over two years It's important note This was just an approximation because we didn't include the fact that you will be incurring interest on your balances every single month But this example was just to give you an idea the debt snowball method works Now you can see with hard work and commitment You can become debt free and once you are debt free you can start building wealth Let's say for instance You took that $1100 that you were using to pay off your debts every month and you Invested that you invested that money for say seven years at an average rate of return of say seven percent How much money would you have after seven years you? Would have one hundred and fourteen thousand one hundred and fifty nine dollars That's a pretty sweet number right? I bet you could come up with a lot of fun things to do with that money So what are you waiting for? Use the debt snowball method to get out of debt Bax and forever If this video is been helpful Please be sure to give it a thumbs up like subscribe to my youtube channel and follow me on Instagram Thanks for watching