snowball method


After watching the first video from Financial Peace University, I was ready to tackle the 7 Baby Steps! You can read more about my debt situation and introduction to Financial Peace University here

With newfound conviction and motivation to get out of debt, I was ready to experience financial freedom! Disclaimer – this is my personal journey through the 7 Baby Steps and I haven’t followed everything exactly. For instance, Dave tells you to cut up all of your credit cards – I didn’t do that, but I’ll explain my reasoning and how I’ve attempted to live by the spirit of the law in a separate post.

7 baby steps snowball

Baby Step 1 – Save $1000

This step was easy since I already had $1000 saved. Checkmark!

Baby Step 2 – Pay Off All Debt Using Snowball Method

This is the baby step I am currently on. Dave Ramsey tells you to use the debt snowball method. Meaning, you list your debts from smallest to biggest. You throw the most money at the smallest loan first, and make minimum payments on the other loans. Once you pay the smallest loan off, you take the money you would normally use on the first loan and put it toward the second loan. When you pay off the second loan, you add up the money you would have put toward your first and second loan, combine it with the minimum payment to pay off the third loan. This creates momentum, hence, the snowball method.

How I Tackled Debt in the Past

In the past, I thought the best way to pay off debt was to target the loan with the highest interest rate first. This makes sense in theory, but according to Dave, people don’t actually save all that much money doing that. Honestly, I didn’t even really do that method all that well.

I had three sources of debt – student loans, my car payment, and a hospital bill. Realistically, I could have paid off the hospital bill in full, but someone told my husband that you should never pay hospital bills all up front, instead, you can get them broken up into monthly payments. I’m not sure where the logic for that came from, but for whatever reason, I thought that sounded good at the time, so we had a payment plan of $100 per month for a year. There was no interest, so I didn’t think it was a big deal.

Anyways, what I was doing – I’d make the payment for the hospital bill and car loan. Technically, I was still enrolled in school, so my loans were deferred. I continued to accrue interest even though there was no minimum payment. To combat this, I made a payment on every single student loan each month (there were 6 separate student loans) to keep the interest down, but I put more toward the loan with the highest interest rate. 

Again, why did I do this method? I don’t really know. It seemed to make sense at the time. I made the necessary payments that were due. And, my students loans weren’t even due yet. I was paying the interest and then some on my highest interest rate loan. Wasn’t that more than enough?

The Snowball Method

According to Dave Ramsey, people pay off debt because of the momentum established when they pay off a debt. This is why he recommends paying the smallest loan first, even if it has a lower interest rate. It shows you that paying off loans is achievable.

I thought I understood this in theory, but I really didn’t until I wrote everything out. If you’re in debt, do this – write it all out from lowest amount of debt to highest amount, ignoring the interest rate.

Lowest to Highest Amount in Loans

Hospital Bill

Student Loan 1

Student Loan 2

Student Loan 3


Student Loan 4

Student Loan 5

Student Loan 6

Implementing the Snowball Method in My Life

Keep Only $1000 In Savings And Throw The Rest At Debt

Based on the Baby Steps and snowball method, I should only keep $1000 in savings as an emergency fund. Anything else should go toward my loans. BUT, since this was all transpiring at the beginning of the pandemic, Dave said to make sure your “four walls” are covered first – food, utilities, shelter, transportation, and it is okay to stop the snowball method. While I still had my job, I was nervous about the possibility of getting laid off, but at the same time, I wanted to make payments on my student loans because there was 0% interest. This was really the perfect time for me to start paying off loans because now I could start with the lowest amount and not worry about whether it had a lower interest rate or not!

Run Like a Gazelle But Be Safe Because There’s A Pandemic

I didn’t feel comfortable clearing my savings and only leaving $1000 due to job security and uncertainty during the pandemic. So initially, I left whatever money I had in savings alone. The first thing I did was pay off the hospital bill. That was easy since there was just a few hundred dollars left. Normally that would be a $100 payment each month, so now I had an extra $100 each month to put toward student loan 1. I continued to make the monthly payments on my car, but my approach to my student loans changed. Instead of making a payment on all of the loans, I only targeted the smallest loan, and tacked on the $100 from the hospital bill. After just three months, I was able to pay off the first three student loans. I did take out some from savings to put toward the loans, but I did this gradually, a little every month, as opposed to clearing everything out at once. 

Next was the car. I took the hospital bill, payment toward the student loans, and the car payment, rolled it all together and attacked my car loan. Technically, my car was scheduled to be paid off in December 2020, but because I used the snowball method, I ended up paying it off in July.

After the car was paid off, I used the car payment, combined it with the student loan payment, and the hospital bill, and put it toward my next student loan. By now, I’m throwing a way bigger chunk of money at my student loan than before, at least five times more than before I started this whole journey. 

How Much Debt I Paid off in 10 Months

At the end of December 2020, I paid off $43,630 of debt. That is just since I started using the Dave Ramsey method in March and doesn’t include the other payments I made in January and February. Now, I have just a little bit left of student loan 5 and then all of student loan 6. The downside is that these are my largest student loans! But, it doesn’t feel like a crazy overwhelming mountain like before. Instead, it just seems like one loan that will require a few months of huge avalanche-sized snowballs. 

My Thoughts on the Snowball Method

I have to say, it’s true – the snowball method helps you build momentum. It works. When I paid off the first debt, the hospital bill, that was no big deal. But when I knocked out the first student loan, I felt accomplished. It seemed so easy and it pushed me to want to tackle the next one. Using the compounded payments from the previous debt would put me so close to paying off my next debt, I’d stretch myself and my budget to make it happen! I would cut spending or take some from savings just because I wanted the satisfaction of getting rid of one more student loan! All of a sudden, paying off my debt was doable! I was doing it! That’s the whole idea behind the snowball method.

At the rate I was going before, there is no way I would have paid off all of this debt in the last 10 months! I would have paid off my car and hospital bill because of the timeline/payment plan they were on, but there’s no way I would have paid off four student loans! Taking the approach I was using, I would probably be chugging away, but not seeing much progress. The snowball method definitely gave me the momentum I needed to get going!

Bottomline, if you’re in debt, try using the snowball method. Leave a comment if you’ve tried this or plan on trying it. Tell me what your approach to debt has been in the past. You can read more about specific ways I’ve saved money and paid off debt in my next post. Stay tuned!



Leave a Reply