Under the Median: Four Steps To Follow When You Want to Become Debt Free

Debt often seems like a ball and chain, constantly pulling you back to "square one".

However, with careful planning, effort, and consistency, you can end the cycle of debt and gain control of your financial future.

What is a debt snowball?

The snowball is a method of paying off debt is a concept, popularized by talk show host and author, Dave Ramsey. Basically, you list your debts, smallest to largest and attack them one at a time, rolling the amount you were paying each month toward smaller bill into the larger ones as you go along. In this way, just like a snowball going downhill, you gain speed as you work your way through your debt pile.

How Does the Debt Snowball Work?

I will begin by acknowledging that there are genuine differences of opinion as to whether the smallest, largest, or highest interest debt should be attacked first. I understand the viewpoint of those who say that high interest rate loans, no matter how large, should be eliminated first. However, coming from an Under the Median perspective, I know from experience that unless a low-income person sees measurable progress quickly, they will get discouraged and give up. By knocking out a small, achievable goal first, they will gain confidence and faith in the process. They will stick with it longer and be able to gain a solid financial footing more quickly.

Let's look at specific steps and examples to see how it works.

https://www.dropbox.com/s/znqier59hh2fzea/Debt%20List-1.pdf?dl=0

I LOVE giving things away for free! So, I designed this handy debt chart for you to use!
Click on the photo or this link to access your free download.

1. List your debts and minimum payments, from smallest to largest.

List them all. Credit card bills and medical debt are hard to ignore. They are in your face every thirty days. They are growing each month, too, unless you are paying them off in full. You may be getting calls from debt collectors, reminding you of your obligation. You aren't likely to forget to add those to your list. Your mortgage is a "no-brainer" too.

It's those folks to whom you owe money and are not on your front door demanding repayment that you are likely to forget. Did you borrow money from Aunt Sandy for your car insurance? Or $100 from Uncle Bill for your new shoes? Include all family, friend, and personal loans.

2. Make minimum payments on everything, except the smallest.

In order to stop the bleeding of increasingly larger interest payments, you need to make the minimum payments on every debt. But, the one at the top of your list, the smallest, gets all of your extra time, attention, and money. I want you to attack that debt like a dog scratching to get fleas to jump off its hide. Be relentless. Throw every cent you can find at this one debt. Did you get Christmas money? It's time to be fiscally responsible. Cash Grandma's check and write her a note, thanking for helping you make your bad relationship with Visa a distant memory.

3. Proceed through the list, adding the amount you were paying on the smaller debts to each consecutively larger debt.

This is where it starts to get fun! Let's say your smallest debt was that $100 you borrowed from Uncle Bill for your new shoes. You can easily pay off that familial debt in one month. Now you have an extra $100 the following month to pay on Debt #2. After that is all paid, you move to Debt #3, paying your minimum payment plus the amount you were paying each month on the first two debts. In a very short period of time, you will be able to breathe easier, sleep better at night, and not be fearful to answer your phone while wondering if there is a debt collector at the other end!

4. Keep doing this until you are debt free!

We have raised four sons on an income which primarily averaged 30% below the national median. In my story I gave you a word picture, which I hope you will carry with you today.

In my post on gazelle intensity, I said, "I was a woman on a mission. I grabbed that great big, audacious goal with my teeth and wouldn't let go-like a dog hanging onto a bone! I was on fire! "Nickels and Dimes" became our daily mantra."

That's what I want for you today! Decide once and for all that you are tired of being broke, tired of living from paycheck to paycheck, and tired of feeling defeated. You are a winner! You can do this thing! 2019 is your year to win with your finances! I am rooting for you!

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What about you?

What is your biggest frustration with becoming debt-free? What topics would you like to see me write about to help you reach your goals? If you have comments or questions, leave them below.