Tuesday, March 6, 2012

Debt Snowball

The premise behind Dave Ramsey's "Debt Snowball" is a fairly simple one: pay off your debts from smallest to largest. According to Mr. Ramsey, "Paying the little debts off first shows you quick feedback, and you are more likely to stay with the plan." The idea is to apply each debt's minimum payment to the next as you work down the list in order to eliminate the debt faster. "Payments Remaining" is the number of payments remaining on the debt when you get to that item. "Cumulative Payments" is the total number of payments made (aka a running total).

As a side note - Mr. Ramsey encourages each participant to have $1,000 in savings before starting any kind of debt repayment. Although throughout the blog, I keep my spending/saving separate from the hubs, I did count our joint savings as my safety net in this exercise. Since one of the goals of this journey is to save more money, I will work on a separate personal savings of $1,000 as well.

Here is my debt snowball (click on it to make it bigger):
First impression: Wow. Almost six years to pay it all off.

You'll probably note that there is only a month & a half payment left on Card 4 by the time I get down to it. I currently pay $150 per month towards the balance because it is a 0% interest rate card. If need be, I may adjust that number in the future once I'm being charged interest, depending on how far along I am on the other balances.

Mr. Ramsey also encourages you to list all debts, including student loans and mortgages on the debt snowball, but since revolving debt is my immediate focus, that's all I've chosen to include on here. I accepted long ago that I wasn't paying my student loans off until my 40's and the mortgage... well, that's 30 years for a reason.

Overall, I think the Debt Snowball is one of the easiest plans out there and I'm partial to it; However, tomorrow we'll look at another option and compare. I know my sister-in-law, Stephanie, has used this plan with success. Anyone else out there have a plan you recommend?

Day Fifteen Spent:
$22.00 Lunch (treated co-worker for birthday)
Day Fifteen Saved:

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