Baby Step Two Debt Snowball
Baby Step 2 Get Rid of the Debt
Now it is time to tackle that debt. Cut up and close all of those credit card accounts. You don’t need them, you have your emergency fund!
List your debts smallest to largest (except for the house) and we will tackle the smallest one first. This is where Dave Ramsey differs from most financial plans. Most recommend tackling the larges interest rate first, “just to be smart” well as Dave says, if we were smart we wouldn’t be in debt in the first place. The whole idea here is to give you some quick wins and get you motivated. Pay the minimum on all debts except that smallest one and throw any and all extra money on that debt. When that debt is paid off add what you were paying on it to the minimum of the next one on the list and keep going. The further down your debt list you go the bigger your snowball gets.
There is a great snowball spreadsheet at the link in the sidebar, try it out it will let you know when you can expect to be debt free!!!!
Posted in financial
March 22nd, 2007 at 9:22 pm
You mention not including the house in your debt list – do you believe it is okay to hold this debt or is it just the last one you are working toward paying off? How do you view handling it?
March 22nd, 2007 at 10:55 pm
Good question! Paying off the house comes later in the babystep process. I will have more on this in the coming days.