Dave Ramsey Explains the Debt Snowball

by Julie on August 30, 2011 · 12 comments

Dave Ramsey has a set of seven baby steps that are part of his Total Money Makeover.

But, let’s face it, Dave is mainly known for helping people to get out of debt. And all of that takes place in Baby Step Two: The Debt Snowball.

The debt snowball involves ordering your debts from smallest balances to largest, and then throwing money at the smallest until it’s gone.

After that, you take all your available debt repayment money — including the payment amount from the debt you just paid off — and you throw it at the next debt.

As you move down the line, the amount of  money you have available to pay off debt each month becomes larger and larger. In other words, it begins to snowball. And that is how you gain traction and pay off your debts really fast.

But why not watch Dave explain the debt snowball as only he can:

Are you currently working a debt snowball? Do you have any tips for making it roll faster?

{ 10 comments… read them below or add one }

Matt Wegner @ Financial Excellence August 30, 2011 at 6:59 am

I’m a big fan of the debt snowball method because of the emotional victories it gives, which helps you maintain the momentum in getting out of debt. It’s not always the fastest or cheapest way to eliminate debt but it seems to be effective more often than not.


Julie August 30, 2011 at 9:37 am

I agree, Matt. And if you stay motivated to continue, that will end up being much faster and cheaper than if you get discouraged and quit.


Jeff @ Sustainable life blog August 30, 2011 at 11:20 am

I’m currently working on the debt snowball. It’s a long slog! I also agree with matt, the victories are what helps the most. As for making it roll faster, spend a lot less than you earn and keep your eyes on the prize. I’d be way ahead of where I am right now if I did that.


Julie August 30, 2011 at 11:43 am

I hear you, Jeff. We’ve lost focus many times. But we’re so close to the end now that it’s exciting.Hope you’ll be there soon!


Leanne August 30, 2011 at 2:03 pm

We’re working on the debt snowball also. It’s been a LONG process for me as I was about halfway done before I got married and married into more debt! Since we got married, hubby and I have taken $116,000 of student loan debt down to under $50K before stopping to plan for a baby. When baby and mama are home and safe (in December or January!) we’ll hit play again and continue with the hopes of screaming from the lobby next summer/fall.


Julie August 30, 2011 at 3:01 pm

Leanne, that’s such an accomplishment. $66k of student loans gone. Congratulations on the baby!


Sakura August 30, 2011 at 9:20 pm

We are currently implementing the debt snowball as of September. I purchased total money makeover and so far I love it. I only read a little each day, I’m an all or none gal and I’m trying to stop doing that.

One tip I have is to check out powerpay.org . It’s a free site that you can type in your debt, balance, payments, interest and any extra money you may have each month to put towards debt. Then you click on the calendar, sort by smallest balance first and it will show you the difference of using the snowball vs. paying the minimum balance. I’ve sorted by both highest interest and lowest balance, honestly the difference was 2 or 3 months. That’s it! The best part of Power Pay is you can download to excel and save it. It’s the third page in my excel budget plan. It gives you a month by month list of your debt and what you should pay on them. This really helped us put things into perspective of how long it will take to be completely debt free!


Julie August 30, 2011 at 9:44 pm

Thanks for the info about Powerpay, Sakura. I hadn’t heard of that. I’ll have to check it out. Congrats on the debt reduction!


Lisa September 7, 2011 at 5:25 pm

Has the government seen this guy? Maybe they could start paying down the debt…makes me wonder which one is the smallest one? lol

Great advice.


Julie September 7, 2011 at 5:27 pm

Lisa, I love that idea. Snowballing the national debt.


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