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Debt.  So many of us have it.  We all want to get out of it.  The coolest part about getting your finances in order is getting out of debt because you’re literally paving your own way to freedom.  I’m so excited to explain how the debt snowball system works because the quicker you learn how to use this amazing tool the quicker you can put it into action and pay off all that dang debt that’s been dragging you down for years.

Before we get into it, grab your financial inventory worksheets and your monthly budgeting worksheets.  These will help you get a clear picture of your current financial situation and exactly how much debt you are carrying.

Feeling like you might be ready to make a change but confused about where to start? Taking this course made things finally click for us.

Not ready for that level of commitment yet?

Maybe you’re just thinking you might want to check out another perspective on how to handle your finances? 

This book is a great (and inexpensive) way to learn about a proven system that has worked for us and thousands of others

Hands holding papers at a desk and using a calculator with text that reads: 8 Steps to becoming debt-free even when you're broke

Why Do You Need to Get Out of Debt?

Maybe you’re actually not collapsing under the weight of your debt.

Maybe you wonder why you need to pay off all your debt?

Maybe you’re not sure what the big deal is about being debt-free?

Well, you’d be in good company…

Some debts are fun when you are aquiring them, but none are fun when you set about retiring them.

OGDEN DASH

As a society, we have been conditioned to think that carrying consumer debt is normal.  In fact, I recently read a staggering statistic that around 73% of Americans will die in debt?!?

This blew my mind.  I don’t know about you, but I can guarantee that I will not be part of that statistic!

One of my main goals in life, and I hope one of yours too, is complete financial freedom. 

This means owing nothing to no one

Really think about the quote above.  When you are in debt, you are indebted to your creditors and your money is not your own.

Living a debt-free life allows you – and only you – to be in control of your finances.  You get to make all the decisions about how you spend your money.

There are many more reasons to pay off debt such as peace of mind, setting a good example for your children, being able to retire early (or at least at a reasonable age), and enjoying your life…after all, you’ve worked too hard not to.

Explain How the Debt Snowball Works

The debt snowball system is only one method for getting out of debt but I believe it’s the best option for most people because you are focusing your budget and your financial energy on paying off one particular debt (the smallest debt).

Doing this allows you to pay off this debt much faster than if you were spreading your energy and extra funds around to each debt evenly.

Here’s a step-by-step…

1)  Take all your debts (except for your mortgage) and list them from largest to smallest, with #1 being the smallest.

2)  Pay minimum payments on debt #2 and up.

3)  Take every extra cent in your budget and put it towards debt #1 until it’s paid off.

4)  Do: Give yourself a high-five.  Don’t: Buy yourself a reward.

5)  Make minimum payments on debt #3 and up.

6)  Take every extra cent in your budget PLUS all the money you were putting towards debt #1 and put it towards debt #2 until it’s paid off.

7)  Rinse and repeat until ALL debts are paid off.

8)  #TreatYoSelf (but with a really small treat)

This debt snowball calculator will save you a lot of time and calculate the exact date you’ll become debt-free. And, honestly, is just really fun to play around with!.

It’s a great tool to use when working to pay off debt because it does all the calculations for you to show you the exact date you will become debt-free.

All you have to do is enter your debt info and it will calculate automatically plus you can forecast how extra debt payments, lump sums, and bonuses will impact your debt payoff, you will absolutely love this tool – it’s a great way to keep yourself motivated along your debt-free journey.

Interest Rate vs. Balance Amount

This is where the debt snowball system gets a little tricky.  

Common sense and some middle school math skills tell us that when busting our butts to get out of debt we should pay off the debt with the highest interest rate first.

This, however, is not the case when using the debt snowball system.

The reason this method works so well is actually more mental and less financial. While paying off the debt with the highest interest rate first would save money, it doesn’t exactly boost morale.

If the debt with the highest interest rate also happens to be the debt with the highest balance it can take forever to gain any traction.

We live in an instant gratification society.  

I find something on Amazon, click “place order” and immediately go sit on my front porch demanding to know why the hell the UPS man is taking so long.

If you watch what you eat and run one full mile and get on the scale you should see a substantial weight drop an hour later, right? (asking for a friend)…

We want immediate results and when we don’t get them quickly enough we lose interest.  

When you begin by paying off the smallest debt first you’re giving yourself an easy win.

You’re giving yourself some instant results!

Paying off the first debt (even if it is only a few bucks) gets you pumped!  You can cross that one off your list with a big fat line and it’s on to the next.

If you’re a visual person be sure to keep your list of debts somewhere you will see often, this helps keep you motivated and excited to cross the next debt off your list.

I can’t explain the feeling you get when you pull those little thorns out of your side one by one.

Rearranging the debts to pay off by the largest interest rate first usually doesn’t save all THAT much money anyway.

Some, yes, but trust me, the momentum you will gain by paying off the smaller ones faster will help you remain so incredibly focused on your goal of becoming debt-free that I believe you will work harder and faster to knock those debts off your list and therefore still save money because it will allow you to become debt-free in a shorter amount of time.

If you have two debts that are the same or very close in amount, then yes, definitely pay off the one with the lower interest rate first.  

Otherwise, don’t let yourself get hung up on those minor details.  

Keep your eyes on the prize and the prize is an amazing, fulfilling, peaceful life where you do not owe anyone your hard-earned money.

I want to encourage you to make a commitment to utilize this system and get yourself out of debt.  

If you have read this far then you likely are in debt yourself and I challenge you to take action today — right this minute. Because you deserve it!

Here’s the Bottom Line

Take one actionable step before you leave your computer or put your phone down. Taking immediate action makes you far more likely to follow through.

Grab your free financial inventory form and take a few minutes to fill it out.  If you don’t have time right now then leave it out on your counter or your desk to do ASAP.

Don’t wait one more day. Now that we are almost debt-free, my only regret is that we didn’t start sooner!  Take a stand and don’t allow debt to control your life for even one more day.  

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About the author

Kristin Stones holding a cup of coffee
Kristin Stones
Owner | Founder at | Website

Kristin Stones is the owner of Cents + Purpose, an online community dedicated to sharing practical personal finance content. Her mission is to equip women with the necessary tools and knowledge to take back control of their money and live a more purposeful life. She creates actionable content to help her audience achieve financial wellness using her simple approach to managing money - all learned through her personal experience of paying off almost $55,000 of debt in under two years.

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