So, this is the part of the Dave Ramsey plan where people fall out. They give up. They claim they can’t go on. The debt snow-ball. I am saying this because it is true for me. Dave Ramsey says that I am not alone. Many others struggle with this step. I have been on this step for quite awhile now. I haven’t given up, and I haven’t fallen out, but I seriously understand. My goal is to complete this step and move to step 3.
Why is this part so hard? It requires a lot of self-awareness and self-sacrifice. Dave Ramsey says, “Personal Finance is 80 percent behavior and 20 percent head knowledge.” So, what is this monster that I am asking you to tame? What does it require of you? It’s simple to explain but requires a lot of change in spending habits to put into effect. This is doable though, with a lot of determination and elbow grease, you can live the life of your dreams later, by making changes to your bill paying now. First, you make sure that you have your budget and your emergency fund. You’ve got to have that $1,000 emergency fund in place. Remember it’s your buffer. Next, you list all your debts from smallest to largest. Ignore the interest rates. Even if it’s a loan from your parents or a friend, that you’re trying to repay, ensure that you list it. There is a method to the madness. Once you pay off a debt, you get motivated. By listing the smaller ones first, you keep yourself motivated. Just like a snowball, you start-off small, as you gather more snow (i.e. debt), you gain more momentum, and become more formidable.
After you have listed your debts from smallest to largest, pay all of the minimum payments on all of your debts except the smallest. What you want to do to your smallest is put all of your non budgeted money toward your smallest debt. This includes any money you saved from perhaps trimming down your cable bill, or extra side hustles you may have picked up. Budgeting, saving, hustling. Now we are talking about snowballing. It goes without saying that you don’t want to throw your debt snowball off by adding more debt. So, you have to say, “No.” “No,” to more credit card offers. (Mint will show you tons of these, but you have to resist.) “No,” to more loans. Basically, “No,” to anything that will make you have to start over. Bottom line, cut up your credit cards.
Getting started when you are mired in debt is hard. I am not going to lie to you. If you do your budget and all you have left over after you have allocated all of the minimum payments is a look of perplexion, know that you’re not alone. Some tips to get the snowball rolling is having a yard sale, working extra hours, stop buying “frill” or “luxury” items, getting a side-hustle (only if your physical and mental health permit), or re-examining your budget and making cut-backs or sacrifices.
When an emergency crops up is when you tap into your emergency fund. It is best to establish what an emergency ahead of time. Buying a gift for a relative who suddenly got married, would not be a reason to dip into your emergency fund. Having your HVAC unit go out and sudden repairs needed for it, would be an emergency. Just do not forget that your emergency fund is a buffer. As soon as you are able, you need to rebuild that buffer, so ensure that you re-fund your emergency fund. Then resume your debt snowball.
You’re not budgeting You’re not 100% focused on your lowest balance Your income and expenses are remaining the same Your spouse isn’t on board You aren’t consistent You aren’t tracking your progress Here is a debt snowball calculator that was created by Dave Ramsey and his team. https://bit.ly/2PZosp3
By: Natricia Edwards
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