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Getting Out of Debt with the Debt Snowball

Updated on January 30, 2011

Getting out of debt

If you are like most people, you probably have some debt. This could include any of the following - first mortgage, second mortgage or HELC, car loans, student loans, credit card debt, medical debt, maybe even payday loans. I used to have debt too. When I got married, my husband brought a lot of debt into the marriage. Credit cards, student loans, car loans and a loan for my ring. It was very hard to get out from under all of that. But we did, and it is possible for you to do it too.

The first step to getting out of debt is to stop creating new debt. This is a hard cycle to break, but it is a must. One of the ways you can stop this cycle is to start a savings account. Yes you heard me right, a savings account. You can't get rid of debt unless you have money set aside to pay for emergencies that come up. Emergencies will come up. That is often times what causes us to use our credit cards in the first place. Unexpected car repair, your child needs new shoes, or a hospital visit. You need to set aside money to cover some of these things first so that you can stop creating new debt.

Depending on your income this can be anywhere from a few hundred dollars to a thousand dollars. We started ours with $1000. This was huge at the time, because we had never saved any money before. It was nice security though. As our family grew, our emergencies grew as well, so we added an additional $1000, and then continued on paying back our debt. By doing this we were able to stop the cycle.

You may be wondering how you are going to come up with extra money for your savings account. Good question! How about selling some of the extra stuff you have been buying with those credit cards? Have a garage sale or list some items on craigs list. Can you work some overtime? Or possibly get an extra job? If the situation is that bad, you have to sacrifice. Often though being in debt is simply a matter of spending too much money. So don't buy that book this week, stop getting coffee on your way to work, bring your lunch to work, don't go shopping for clothes, etc. These things really do add up and within a few weeks you will have your savings account built up.

The next step is figuring out how much debt you have. This is one of the hardest things to do, because once you know how much you owe, it is even scarier than before. This is essential to tackling the problem though. List all of your debts smallest to largest and start paying off the smallest debt first. You need to send every extra penny you have towards this debt until it is paid off (don't forget to continue paying the minimum on all your other debts).

Now are you wondering where you are going to get extra money from? How about from those areas I mentioned above? Or cutting expenses else where? For my husband and I it wasn't how much we were spending, but how little we were making. So my husband and I decided we needed to work extra jobs. All of the money we made working these extra jobs went straight towards the debt, starting with our smallest. This was huge and can be huge for you to. Remember, this is not forever, just until you can get your debt paid off.

Another thing we did was refinance our home. When we lived in our first house we had to pay Principal Mortgage Insurance on it, because we did not have 20% to put down on it. Home prices had appreciated enough after a couple of years that we were able to refinance the mortgage and drop the PMI. This lowered our payments by $400 a month. That was a lot of extra mortgage to go towards debt. So analyze your situation and get creative. Every little bit counts and it adds up quickly.

When it comes to getting rid of debt, many people want to start with their largest debt first, but that could take forever, and to get the ball rolling you need to start with the smallest. Another common mistake people make is to send in a little extra towards each debt every month. $5 towards this one, $20 towards that one and you will not make a dent in your debt total. If you add all that extra together you could send in $50, $75, or even hundreds of dollars towards your smallest debt and it will be gone in just a few months. Once that first debt is gone, put the entire amount you were paying towards that debt to the next one listed. Continue on down your list, adding more money each time a debt is paid off. Before long you will be debt free!

At the end of this journey, all that money that you were putting towards your debt is yours to spend however you like. Think of how much money you will be freeing up each month, by not having all those monthly payments. All you need to do is get started!



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      Fix My Debt 9 years ago

      Fantastic hub!

    • profile image

      Free Car Quotes 9 years ago

      Great Hub you have here :) please read my new hub about getting free online car quotes...

    • profile image

      buy absinthe 9 years ago

      great info thank you

    • profile image

      buy absinthe 9 years ago

      great info thank you

    • scottb992000 profile image

      scottb992000 10 years ago

      Excellent article. Wish I would have taken some of this advice a long time ago, now I am having to repair my credit. Follow my progress

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      sipoom99 10 years ago

      I'm in debt with 15 credit card. Thank you for solution.

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      Marianne Fuerst 11 years ago

      Great article! Thanks for the tips!