How one blogger paid off $11,500 in 10 months using the “debt snowball” method. [No-Credit Needed]

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  1. Paul D says:

    My wife developed a snowball plan to help me pay off over $8000 in roughly the same amount of time.

    It’s so simple once you look at it and map it out. I was struggling before we read about this method.

  2. bostonguy says:

    I can’t believe this concept isn’t just a simple matter of common sense! Instead of spreading money to all of your accounts, focus all extra money on a single account until paid, and repeat!

    After being out of work for 4+ years (severe illness), I got back to work at my previous level of pay. In the past 15 months, my wife & I have paid off $20-30K, and will be debt free within a month or 2.

    My plan?

    1)Pay minimums on everything every month
    2)take ALL extra money, and send it to the same account every month until paid off.
    3)Repeat until out of debt.

    Also, brush up on your contract readng skills, and play the credit card juggling game! Almost the entire time I was out of work/in debt, I paid practically no finance charges. My wife & I just kept opening new cards that offered good transfer deals. Either 0%, or (up to) 4.99% for the life of the balance. This spring/summer, I had a Discover card with over $9K at 0% until August. I made sure I sent every penny I could scrounge to them, to make sure I paid it off before the promotion ended. If I didn’t, I would have just found another deal. Now I’m using that Discover card to get rewards back on my Auto Gas purchases!

    And if you’re worried about ruining your credit by opening lots of cards, you’re probably in much greater danger of ruining your credit by screwing up repaying your bills. My wife & I both have a half dozen cards in each of our names, but our FICO scores are nearly maxed out!

  3. synergy says:

    @bostonguy: You and I used the same deal for the same thing! :)

  4. olegna says:

    Yes, this is the best way. And hit high interest first. I tracked my monthly fees ($26,000 in two years, long story) and saw fees getting slashed considerably each time one card was paid off. I started the process with about $600 in monthly fees and in 18 months I saw that slashed to $200 while still owing balances on two cards. So at that point, $400 “extra” was going to paying off the principal that wasn’t being used to pay off the principle 18 months earlier. Wiping out these high interest cards’ debt one by one considerably affects (“snowballs”) your work.

    I don’t want to be a downer, but I should say that for one person to pay off that much unsecured debt requires about $2,300 a month in payments. When i was earning about 1,700 a month it was almost impossible to pay anything but to service that debt.

    There is no doubt in my mind that the best way to tackle unsecured debt is to choose the card with the highest interest rate and hammer at that while paying minimums on the others.

    Also: do not make late payments, period. If you have to choose O/D on your checking account and pay that fee instead.

    PS: To me “minimum payment” is $10 above the stated minimum. That ensure a “symbolic” reduction (if only for about $10) on those other cards while you’re devoting all your funds to the highest-interest card first.

    PPS:

    Think of it this way. The way you got into $600-a-month fees was fast and easy. It may not be easy to dig out, but it does work the same way in reverse in terms of fees getting whittled down. The reduction of fees “compounds” the same way paying off as it does building up.

  5. paco says:

    @olegna: I like the minimum + $10 method.

  6. juri squared says:

    We’re doing this to pay off a whole bunch of medical bills. It works quite well!

  7. Chad LaFarge says:

    I first heard about this method from Dave Ramsey. One difference is that he recommends paying on debts from smallest to largest balance. Technically, you’ll spend a little more, but you’ll be so excited by the rate of success from those smaller cards falling that you won’t give up hope and drop the plan. Cost is a little more, but the success rate is higher, as I understand it.

    Regarding the minimum + 10: If I have 6 cards and do that, I’m missing the opportunity to pay down an additional $50 on my target card each month. It works the same either way, but you still postpone a payoff party by dragging it out like that.