Unraveling Money – My Exploration of Personal Finance and Productivity

July 2, 2009

Implementing the “Debt Snowball”

Filed under: Debt — unravelingmoney @ 5:52 pm

I’ve been reading the seminal Total Money Makeover by Dave Ramsey (got it at the library!) and I’ve also read reviews on his book at other sites, and I think I’m ready to try to implement the famous “debt snowball”. Dave Ramsey may be an Evangelical Christian and a Fox News supporter, but he has some great ideas and perspectives on living a debt-free life and successfully paying off debt and saving for the future.

Essentially, the debt snowball is a motivational tool for paying off debt from different sources. Sure, you could somehow consolidate everything through a debt consolidator, but by all accounts they are ripoffs. With the debt snowball, you line up your debts from smallest to largest and pay them off one at a time. You get the motivational benefit of crossing something off your list each time, and then the intention is that you keep paying at least the sum of all the minimums on each debt you are tackling, adding to the amount each time. He always mentions intensity and focus – you must be extremely focused at paying off more and more debt each time, earning extra money wherever possible and saving wherever possible.

So – I think I’ll try this. The first step is to list out all your debts in order, smallest to largest. I’m also going to include the interest rate where possible. Now that I was able to reduce the interest rate on both of my credit cards to 7.99% (YAY – that’s what follow-up will get you), I won’t need to prioritize one over the other in terms of paying off sooner. That, incidentially, is one of the main arguments agains the debt snowball – it isn’t logical. Logically, you should pay off the debt with the highest interest rate first. However, humans aren’t usually logical, so it’s possible that the motivational benefit of crossing small debts off the list is helpful. We shall see.

So – deep breath – here are my debts:

Banana Republic Store Card -$274.98 – APR 23.90%

IRS (unexpected charges from 07 that just came in) -$1,700 – APR unknown

Wells Fargo Visa -$6,842.59 – APR 7.90%

Citibank -$7,246.55 – APR 7.99%

Sallie Mae Student Loan -$35,000 – APR WAY TOO HIGH

Union Bank Mortgage – $600,000 – APR 1 MILLION PERCENT

To be updated…



  1. I agree it is not logical. But who cares? Logic also didn’t get us into debt either. It was the emotional rush of shopping, buying, and “owning” as the marketers tell us. Whatever way gives you the emotional motivation to keep on keeping on is what is key. Getting rid of debt is a financial marathon. No short cuts to financial freedom. So, whatever keeps you going in this marathon keep on doing that to run hard to beat debt. Good luck and God Bless!

    Comment by BDO — July 2, 2009 @ 7:13 pm

    • Thanks, I definitely agree. Seeing as getting into debt is a totally illogical thing, it only makes sense that an equally illogical solution might be best! Best of luck to you.

      Comment by unravelingmoney — July 2, 2009 @ 10:16 pm

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

Blog at WordPress.com.

%d bloggers like this: