Our Journey to Financial Freedom – Part 3 – Debt Snowball

Dave Ramsey’s snowball method provided a way out of the crushing pressure of debt. Living life paycheck-to-paycheck was all we had known and appeared to be the only way to live. Growing up it seemed the only people that didn’t live paycheck-to-paycheck were the wealthy who inherited money or those who made an exorbitant amount. As a single income family, we didn’t fit into either category and thought our lot in life was to live paycheck-to-paycheck.

All seven “Baby Steps” can be found here.

This post will focus on the snowball method of paying off debt and how to get debt under control.

The snowball method can be found here:

When we started the Dave Ramsey snowball journey, our consumer debt totaled $118,000. In order to “keep debt under control”, it would be moved from 0% credit card offer to 0% credit card offer. The philosophy was that interest would remain low while the debt was paid down. However, once a credit card limit was available it was spent on something else. Instead of paying down debt by transferring the debt to new cards at a lower interest rate, the debt continued to increase as more cards were opened up. It was a vicious cycle that was difficult to comprehend while going through it.

We had no idea how to even begin attacking that amount of debt and it took awhile to figure it out. Even more confusing was figuring out how to budget. Once a monthly budget was compiled, we blew past it faster than expected. It took a few months of vigilance to understand where our money was going and how to reign in the spending. 

Following the snowball method, all debts were written out from smallest to largest without regard to interest rate. It makes no logical sense to pay lower interest rate debts off first, but it is psychologically beneficial. Paying off a debt, no matter how small, allows you to get in the proper mindset and see a small victory. This small victory allows you to gain momentum and keep rolling down the hill. Eventually so many small debts are paid off they make a big difference.

A kick starter in 2018 was selling our 2013 Toyota Camry. We had purchased it a couple years prior and loved the car. Though we loved the car, it wasn’t used all that much since I worked from home and Nikki homeschooled the kids. I took it to a local dealer who offered less than we owed on our loan. To get  more cash out of the car, a sign was put on it in our front yard and it was put on Facebook Marketplace. Within a couple of weeks, and a few test drives someone offered $3,500 more than was left on the loan. Selling that car was hard, but it freed up $279 a month and allowed a 20 year old F150 to be purchased with cash.

Another kick-starter was taking on a second job working for a family member. I was able to work Saturdays on construction sites and even took some PTO at my job to work the side gig. Those two small steps allowed debts to finally be paid off and momentum to continue growing. By the end of 2018 we had paid off two small student loans of $6,500, our car debt of $9,500 and monthly payments of $400. This allowed us to throw all of that money at the next pile and continue moving at a quicker pace. At this point we were finally seeing the snowball gain momentum, and while we had a long way to go, we were proud of what we had accomplished and motivated to keep going no matter what.