Are you looking at your life and wondering how the heck am I ever going to find the freedom I’m craving with all of this debt?

You don’t have to look far to see others around you who are traveling the world, living free, and who don’t appear to have a worry in the world. It can be frustrating and downright depressing when debt is getting in the way of your dreams to travel. I know I’ve been there! Several years ago we were struggling financially after the ski resort I worked at went into foreclosure and laid off all its employees. I was not only frustrated that we weren’t able to live the life we dreamed of, I was depressed because I wasn’t sure how to pay off the debt we had. What’s most frustrating is not knowing where to start. 

Should you pay down debt that has the highest interest rate or should you focus your energy on the debt with the lowest interest?

When you look at a big chunk of debt it can seem like an impossible challenge.  Every bit of money you throw at it hardly makes a dent. Getting out of debt is a mindset and that’s where the debt snowball comes into play. 
The debt snowball made famous by the financial guru Dave Ramsey offers an approach that is not only good for reducing debt but is also good for the mind. 

Why we think the debt snowball is the best for getting out of debt

  1. The debt snowball is easy to implement and understand 
  2. You see progress quickly
  3. You feel empowered and motivated because you see debt completely eliminated

the debt snowball explanation

You’re probably wondering what the heck does a snowball have to do with my debt?  Quite a bit actually.  The debt snowball in a financial sense works similarly to a snowball rolling down a mountain. Picture a snowball starting from the top of a mountain heading downhill.  As the snowball starts its descent it starts off small but as it gains speed it becomes larger and larger while gaining more momentum and adding more snow. This is exactly how the debt snowball works with your money too.  You’ll start small with focused intensity. Once you put some effort towards gathering snowflakes (money) for your snowball, you begin to gain momentum as it heads downhill allowing you to crush your debt once and for all.

How The Debt Snowball Method Works

Your objective with the debt snowball is to focus on paying off small debts first. 

For example, if you have 4 credit cards each totaling $150, $800, $300, and $1,200 you want to pay off the card that has the $150 balance first. Once you have eliminated the smallest debt, add the freed up money from paying off the first debt to the second, and so on.  As you shortly say goodbye to 2 debts you begin to realize that this process is doable and the drive to pay off more becomes contagious.  We like this method because it’s good for the mind. You of course need to keep paying minimums on your other debt but just put your focus toward your smallest debt.

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why the debt snowball is effective

There’s a bit psychology mixed in with this whole debt snowball payoff plan.  The mind is a powerful thing and by seeing results fast you’re more inclined to stick with the program until the end. We all like to feel accomplished and the debt snowball technique gives you that confidence.  It gives us a quick dose of “you can do this!” The first time you eliminate a debt you’ll be feeling all sorts of highs knowing you’re making progress.  The thought of being able to accomplish your goal of becoming debt-free starts to sound more realistic rather than a hazy idea in your head. It’s been scientifically proven that you’re more likely to stick with a plan if you see fast results.   This is exactly why the debt snowball works so well. People become stressed out by financial burdens and this method helps people see that there is a light at the end of the tunnel. By concentrating on the smallest debt first it keeps you from becoming overwhelmed by the big picture debt. 

5 Steps For Implementing The Travel Debt Snowball

You ready to put this snowball in motion to see how it works?  Let’s walk through an example with our fake friend Jenny. Jenny just received her paycheck and after reviewing it and her bank account she realizes she has an extra $650 from working a bit of overtime this month.

Step 1

Jenny lists all of her debts excluding her mortgage from smallest to largest regardless of interest rates.
travel debt

Step 2

(Month 1) Jenny is going to take that extra $650 she found when reviewing her budget and apply it along with the minimum amount due to her Capital One Credit card (Debt 1). This means she’ll be paying a total of $675.00 to expense #1 and the minimum amounts to the rest of her debts.  
travel debt
Jenny’s balance of $1000 on debt #1 is a lot of money.  But that $30,0000 car loan is a TON of money. By focusing on paying off that $1000 first Jenny begins to train her brain to see that this is possible and she CAN do it. If she’s able to find some extra money next month too she’ll see that the $1000 debt has completely disappeared.  Goodbye! The achievement of completely eliminating her smallest debt will motivate her and fuel her fire to continue knocking out the next.

Step 3

(Month 2) Once again Jenny had a great month and has an extra $650 from working overtime and selling her old bike.  Lucky for her she’ll end this month by completely paying off debt 1 with a portion of that $650 and whatever is leftover from the $650 she’ll put towards debt #2. Can you feel the momentum?  She’s starting to get this snowball rolling now.
travel debt

Step 4

(Month 3) Guess what? Jenny has now completely paid off Debt #1 and can begin focusing her energy on paying off the next. 
travel debt

Step 5

(Six months later).  Here’s where the magic begins to take place. Jenny has now completely paid off 2 debts and she can begin working on the third.
travel debt
Can you see how this begins to gain momentum as the smaller debts are paid off? Jenny started with a total debt balance of $54,000 and by month 6 she’s down to $41,450! 

what kind of person will be successful with the debt snowball?

We think the debt snowball is good for just about anyone who is struggling with their finances.  The encouragement you get from completely eliminating those small debts is motivating. However, that being said you need to figure out what works best for you. A plan does you no good unless you implement it.  Start today and free up some cash for what matter most in your life.