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    Snowball Method

    After reading all your posts about how great the snowball method works, hubby and I decided we were going to do the snowball method on our credit card debt. We are still building our emergency fund and such, but will be paying the minimum on other cards while we pay the smallest off slowly. I appreciate the ideas. And would like to know any other suggestions if you have them.

    #2
    Sounds like you have a good plan. My only advice would be to make sure that you don't continue to use your cards or to rack up debt in other areas (car loans, etc.) Just stay focused on the goal of becoming debt free.
    Brian

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      #3
      A couple of questions. First is where did you learn about the debt snowball idea. Second, is your plan to pay off debts and build an EF at the same time?

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        #4
        Originally posted by bjl584 View Post
        Sounds like you have a good plan. My only advice would be to make sure that you don't continue to use your cards or to rack up debt in other areas (car loans, etc.) Just stay focused on the goal of becoming debt free.
        Our credit cards are currently in the freezer. LOL. In a big block of ice. So, yes, we are focusing on just becoming debt free.

        Originally posted by littleroc02us View Post
        A couple of questions. First is where did you learn about the debt snowball idea. Second, is your plan to pay off debts and build an EF at the same time?
        I learned about the snowball idea from this forum! I was reading around and a lot of people were talking about it. After googling it, I read that if you pay off your smallest debt first, regardless of interest rate, it's a good way to get started and get finished faster. And yes, I am paying off debts and making an emergency fund at the same time. It may seem redundant, but my husband has no health insurance and his car is a POS. So, emergency fund is a necessity, as is being debt free. I don't have enough in the emergency fund to even pay off one card though.

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          #5
          My only concern is that doing 2 things at once takes longer. You spread your self thin. I would say in your situation to put all of your intensity on building your EF fund up to where it's comfortable meanwhile paying minimum on your debt, when the EF is satisfying conquer all of your debt. I just worry that the healthcare and car will come back and bite you with to small an EF. If you don't have the EF to cover your emergencies then the natural habit for most is to borrow. Wouldn't it be nice to have some cash set aside to cover all problems??

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            #6
            Originally posted by KiwiJo09 View Post
            After googling it, I read that if you pay off your smallest debt first, regardless of interest rate, it's a good way to get started and get finished faster.
            It is a good way to get started if you're not able to handle yourself around debt, or in some cases if you're in dire need of cashflow.

            But it absolutely is not a way to finish paying off your debt faster. Not sure where you read that, but that part is not correct. Highest tax adjusted interest rate to lowest tax adjusted interest rate saves the most time and money.


            The point of the snowball is not to pay off faster or save the most interest, but to attempt to gain some extra motivation by the 'reward' of paying off the debt. Seeing those $0 balances is supposed to reward you and encourage you on the path to being debt free. And I agree that can be motivating.

            But there are other ways to reward yourself - for instance, a special family night out for every $1000 you lower your total debt. A movie night for each $500 you remove. Nothing fancy, but something that is a reward for you. You don't want to go in debt to reward yourself for getting out of debt! Post your debt balance on the refrigerator and track it as it goes down. Make a list of your starting debt, and the new balance every month - crossing off that old balance and writing the new one. Put up target dates about when you're 1/4 of the way, 1/2 way done, etc.

            The snowball method is just one of many motivational techniques.

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              #7
              Originally posted by littleroc02us View Post
              A couple of questions. First is where did you learn about the debt snowball idea. Second, is your plan to pay off debts and build an EF at the same time?
              I first heard about the snowball method from Dave Ramsey. The theory works on human psychology; by paying the smaller debts first, the individual, couple, or family sees fewer bills as more individual debts are paid off, thus giving ongoing positive feedback on their progress towards eliminating their debt. In theory, by the time the final debts are reached, the extra amount paid toward the larger debts will grow quickly, similar to a snowball rolling downhill gathering more snow (thus the name).

              If you haven't heard of him you should check out his website and/or his book "The Total Money Makeover."

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                #8
                Originally posted by muexm View Post
                I first heard about the snowball method from Dave Ramsey. The theory works on human psychology; by paying the smaller debts first, the individual, couple, or family sees fewer bills as more individual debts are paid off, thus giving ongoing positive feedback on their progress towards eliminating their debt. In theory, by the time the final debts are reached, the extra amount paid toward the larger debts will grow quickly, similar to a snowball rolling downhill gathering more snow (thus the name).

                If you haven't heard of him you should check out his website and/or his book "The Total Money Makeover."
                If you've seen my posts for the past year or so, I've been following the David Ramsey plan for 6 years, I have all the books, I was just trying to find out where the user heard about it to see where they were coming from.

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                  #9
                  I persona;;y like the snowball method for psychological reasons. When we were getting out of debt, one of our lowest debts had a large interest rate and when it was paid off we used that payment for the next one in line. We also found money in our budget plus selling items to bring down the debt faster. I looked at it as one less bill to have to pay. At that time, it was also the stamps, time, etc for each bill that we owed. We saved a minimal amount knowing that if something came up that we could put it on credit. We saved a minimal amount towards our emergency fund but this is also a personal strategy.

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                    #10
                    Mary Hunt, author of the Debt Proof Living site and many books was the first person I read who suggested a snowball type method. She also has great information about setting up a freedom account for non monthly bills. A freedom account helps you plan and save for those expenses that don't come up every month, such as car insurance, car maintenence. I would highly recommend establishing this type of fund.
                    My other blog is Your Organized Friend.

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                      #11
                      You can find her book in your local library saving you money. You can also get Dave Ramsey's or any other books from the library as well. That way you know if you want to purchase the book for your own library and reference. I have bought used books from various dealers and have been pleased with their condition. Mary Hunt gives you a good basic idea of budgeting future expenses into your budge.

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                        #12
                        Another one who talks about snowballing, but doesn't call it that is David Bach, author of the Automatic Millionaire. Like Aleta said...check it out at the library or find it used.
                        My other blog is Your Organized Friend.

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                          #13
                          I agree with JPG.

                          Personally I will attach debt with highest interest. It is the fastest way to get out of debt. Its great that you guys have breezed your credit cards, make sure to see the statement and grab the balance transfer offer if you could get lower APR.

                          Lets say I have two credit cards.
                          APR for Card A is 29%. Total limit 10k. Balance 7k
                          APR for Card B is 10%. Total limit 10k. Balance 7k
                          If Card B is offering me balance transfer offer with existing rate for 3% transaction fees, I will transfer 3k from card A to card B. (Assuming you are paying more than minimum and your balance is decreasing every month).

                          For the same purpose, I would keep my eye open on new credit card offer in mail as well.

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                            #14
                            My wife and I currently using the snowball method. Its working great. Went from $47000 to $27000 in less than two years. Just remember not to use the pesky credit cards while you are doing it.

                            Good Luck.

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                              #15
                              Originally posted by KiwiJo09 View Post
                              After reading all your posts about how great the snowball method works, hubby and I decided we were going to do the snowball method on our credit card debt. We are still building our emergency fund and such, but will be paying the minimum on other cards while we pay the smallest off slowly. I appreciate the ideas. And would like to know any other suggestions if you have them.
                              The snowball(smallest to largest balance) method is meant to be intense. If you plan to go slowly, you would be better off paying the highest interest rates first.

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