Comments on: Paying Off Debt: 6 Steps to Building a Better Snowball

By: Former shopahilic

Former shopahilic — Sat, 23 Apr 2011 12:42:45 +0000

Wow, I just stumbled across this page and will be trying out this method. I have a large student line of credit, one large sum in collections (13k) and 2 other credits cards that arent as large but close to it.. I have a decent job now, but stuggled the entire time I was in school. I am now paying for my misguided ways.

I already have a saving account that I was use to save for a down payment on a house..I usually dont touch it. I put 11% of my monthly income there.

I have a $500 credit card that is at a zero balance, can that not be my emergency fund?

So far I have been paying large sums to all of my debit and have so far only paid off one small credit card debt. I am hoping this method will pay off my debts fast.

Just a question about my collections. Its at no interest now but its very bad for my credit score. I read it will stay on my credit report for 6 years after the day I paid it off. Currently I am paying $400 a month on this debit. Should I still keep this debt last on my list?
I just want to try and repair my credit score AND pay off my debit.

Any advice?

By: NCN

NCN — Tue, 04 Aug 2009 23:32:07 +0000

Thanks for the linkage!

One note, about which method to use. If you have financial discipline, I’d go w/ highest rate first. If, on the other hand, you really need to SEE some quick results, to stay motivated, I’d go w/ lowest balance first. In fact, I’d say that SEEING that first small balance disappear, for me, was worth 1000 bucks in extra motivation… Or, combine the two, paying off a few small balances to begin w/, and the rearranging the plan, based on rates, once you get the hang of it.

As always, Flexo rocks!
-NCN

By: Flexo

Flexo — Fri, 21 Nov 2008 16:48:13 +0000

Mahonjh: That’s great that Dave Ramsey has helped you get inspired to get out of debt. He’s wrong about the math comment, though. Even the best mathematicians can get into debt, but that doesn’t mean that they or anyone with lesser math skills can’t handle a better system of getting out of debt. If you’re willing to pay more (in larger interest payments using Dave’s system) and take longer to get out of debt, then you’re not really improving your money management skills. You’ll get there, and that’s better than nothing, but you could have chosen a cheaper and faster path.

By: mahonjh

mahonjh — Fri, 21 Nov 2008 15:56:01 +0000

I am following the Dave Ramsey plan of debt snowball. I can tell you him plan is for me the best way, and to the comment that it is mathematically inefficient. Dave would say that if we could do math, we wouldn’t be in debt.

By: kristy

kristy — Wed, 16 Jul 2008 21:25:56 +0000

The theory behind the emergency fund, I think, is that if you don’t have one, the unexpected costs that occur (a/c going out, car repairs, etc) will have to come out of your debt snowball or avalanche money, and you will have a harder time paying off debt. Once you have an emergency fund, you are no longer using credit for that, which also helps with not adding to the amount of debt on your credit cards.

By: Scandale

Scandale — Thu, 05 Jun 2008 16:25:11 +0000

Okay, i’m nearing the bottom of Mt. Everest. $ 3,800 left to go at zero % (will be paid before expiration in Dec). $ 1200 @ HSBC in cash. No debt other than house and 401(k) loan. (Yes, I know…..).

Question is – where in the avalanche would you place 401(k) “debt” ? Before or after building up the emergency fund ?

By: Daniel

Daniel — Mon, 02 Jun 2008 21:33:29 +0000

Amen brother!

We all need to do our best to limit our spending and frivolous purchases. I might recommend stealing your neighbor’s wireless signal for internet, canceling cable,service and downloading free stuff from the internets, getting a pre-paid cell phone nand skype (skype is $3 a month for unlimited calls to any phone in the world), and cycling when and wherever possible. To most Americans these ideas will sound absurd, too difficult, or illegal. But it’ll lower your expenses, cut your carbon footprint, and give you more beer money.

By: Alan

Alan — Mon, 12 Nov 2007 23:42:35 +0000

Great advice. I still don’t get the initial emergency fund idea though. That $1000 in savings is not helping me when I have thousands of $$$ at 18%+. How much quicker would I get my stuff paid off if I used that $1000 to pay credit cards, etc. off? THEN build the emergency fund. It will take a lot less time, and I still have the cards if something goes wrong before the zero debt point…

By: Dan

Dan — Tue, 04 Sep 2007 20:30:17 +0000

I have a card that I was approved for with 0% APR on balance transfers AND PURCHASES for 12 months. I did not get in on the initial balance transfer offer, so there is a 3% charge on future balance tranfers. I use it for purchases and deposit my entire paycheck into my bank account, rather than taking out $250 every other week. I pay for groceries with this card as well rather than writing a check. That is money I can use to pay down high interest cards. Funny that I don’t see any advice out there about using available credit limit to perpetuate balance transfers onto lower APR cards while paying off high interest rate cards. There is a substantial amount of hidden money that can accellerate the debt reduction process.

By: Rob in Madrid

Rob in Madrid — Thu, 30 Aug 2007 16:45:44 +0000

it goes without saying that the other side of the debt snowball is frugal living. You won’t ultimately be successfully unless you learn to lower your cost of living.

I define frugal living as “living life to it’s fullest with the smallest possible financial footprint”

By: Dan

Dan — Thu, 02 Aug 2007 20:14:12 +0000

Our church recently did a sermon which contained the debt snowball method. Here is the link to the sermon if you’d like to listen.

http://daybreak.libsyn.com/index.php?post_id=230206

It was part of an entire series looking at God’s perspective on finances called “Bling-onomics.”

http://daybreak.libsyn.com/index.php?post_category=Bling-onomics

(Admittedly this is a promotional comment – but it is on topic too…)

By: Lazy Man and Money

Lazy Man and Money — Thu, 02 Aug 2007 15:00:31 +0000

This is an excellent post. I found the calculator a little difficult to use. I like the idea of just paying the highest interest first and just going from there. Then again, I’m Lazy.

As an aside, I think there’s a percentage of people who use the Clerks’ snowball method as a way of paying back debt.

By: Flexo

Flexo — Wed, 01 Aug 2007 23:29:37 +0000

tCA: It’s worth a shot. It’ll be better than half the stuff out there.

By: the Cerebral Assassin

the Cerebral Assassin — Wed, 01 Aug 2007 21:46:28 +0000

Does a 3-rule, 8-word book sell? I could add some more rules and words:

“Investing 101-

1. Buy low.
2. Sell high.

If you’re not comfortable doing it that yourself, buy an asset allocation fund that you hold on to for a long time.”

That’s 2 more rules and 28 more words. Can you help a CFP publish and market a book like that?

By: Flexo

Flexo — Wed, 01 Aug 2007 21:35:51 +0000

tCA: You’re on your way to being a bona-fide, ground-shaking finance guru. Congrats! I’ll help sell your book.

By: the Cerebral Assassin

the Cerebral Assassin — Wed, 01 Aug 2007 21:22:45 +0000

1. Save more.

2. Spend less.

3. Don’t do anything stupid.

That’ll be $2,000 for the plan as I’m highly credentialed in the financial services industry. Please come again!

If people did that, there would be less need for people like me.

By: Flexo

Flexo — Wed, 01 Aug 2007 14:29:34 +0000

Harrison: Exactly. If one doesn’t become a person who lives within one’s means — and it is possible to change with dedication, drive, desire, and support — one could still go through all the steps but eventually end up at the beginning, burdened by credit card debt.

By: Harrison

Harrison — Wed, 01 Aug 2007 14:15:28 +0000

I think the most important step is “Commit to avoiding new debt” and make the decision really get out of debts. Without a concrete decision, all the plans and actions are useless.