Get Completely Out of Debt in 7 Years” was the tagline my former boss and co-worker read for a Continuing Education class at one of the local universities. It sounded absurd, but they were intrigued by the tagline and decided to spend the $20 to register for the workshop. Needless to say, they enjoyed the class so much that my boss set-up a one-day departmental training so the entire department could use the tricks of eliminating debt.
Courtesy of dollarphotoclub.com
By the middle of our training, I, too, was convinced that my husband and I could become debt-free. What was the trick to eliminating debt so quickly? Well, I now know, it is what Dave Ramsey calls the “Debt Snowball” Method (I call it the “Trickle Down Effect”).
How does it work?
Step 1: List all of your debt from the smallest to the largest (not including mortgage).
Step 2: Make the minimum payments on each debt.
Step 3: Take any leftover/additional income and apply it to the smallest debt (along with its minimum payment) and tackle it with intensity.
Step 4: Once the smallest debt is paid, take all of the money you were paying on that debt and apply to the next smallest (along with the minimum payment you were making). Attack that debt with intensity as well.
Step 5: Keep allowing the money from the previous debt to “trickle down” to the next debt once paid. This will allow you to pay off each debt quickly with much determination.
We eliminated thousands of dollars of debt by using this method after my job’s departmental meeting a few years ago (read our “We did it, Again?” blog to get our story). And now, we are attacking our debt with much more intensity and tenacity.
Remember, most Americans do not have $1,000 saved for emergencies without having to borrow or use a credit card. So before you start paying off debt, save at least $1,000 first (with the same tenaciousness), then begin with Step 2.
What methods are you using to get out of debt quickly? Share or leave a comment.