Snowballing

**daughter of pearl** · 08-04-2008, 11:03 PM

Hi folks!

Just checking that I understand correctly: snowballing is when you put extra money into bill payments, and knock them down one after another...is that right...

Janet

**Wendy99** · 08-04-2008, 11:15 PM

Originally Posted by daughter of pearl

Hi folks!

Just checking that I understand correctly: snowballing is when you put extra money into bill payments, and knock them down one after another...is that right...

Janet

Mostly correct .. you start with the smallest debt, once that's paid off you take the money you were paying on that and snow ball it into the next debt. The cycle continues once that 2nd debt is paid off, you take the money that you paid on 1st and 2nd debt and snowball it onto the 3rd debt .. and on it goes...

**Wendy99** · 08-04-2008, 11:19 PM

Actually Greebo explained it MUCH BETTER in another thread .. I'll copy it here for you (hope thats okay!!)

"Debt Snowball. Pay MINIMUM PAYMENTS on all debts *except* your cheapest. Put everything you can on the smallest debt. Ignore the % math, use $ amounts. Kill it, FAST. Once its dead, take the minimum payment + the extra from the dead small debt, and apply it to the next smallest debt. Every time you kill a debt, the snowball gets bigger by the size of the minimum payment for the next debt. Keep this up until all debt is gone EXCEPT the house."

**ladykemma2** · 08-05-2008, 11:52 AM

suggest going to dave ramsey's web site and reading reading everything he says,and listening to his free radio archives.

baby step 0.5 stop using credit cards
baby step 1 baby emergency fund 1000 dollars
baby step 2 snowball debts
bab step 3 3-6 months of take home pay or expenses (add mary hunt's idea of contingency fund /sinking fund here)
baby step 4 15% to retirement
baby step 5 save for kids college
baby step 6 pay off mortgage
baby step 7 live life

**Cricketlegs** · 08-05-2008, 12:19 PM

Baby step number 2 can take a while but it does work and it works well.

You need the baby ef to keep you from adding debt before you start your snowball. IT IS IMPORTANT so do not skip this step or you will ADD to your debt the minute "something" comes up and it will...oh it willlll.

**Izzy0906** · 08-05-2008, 12:41 PM

I'm trying to follow those steps. Step 1 done. Step 2 I'm working on though I have chosen to make it a mini EF at $500.

**Greebo** · 08-05-2008, 12:43 PM

Originally Posted by Izzy0906

I'm trying to follow those steps. Step 1 done. Step 2 I'm working on though I have chosen to make it a mini EF at $500.

Dave says that when someone has an income of 25,000 or less, a baby EF of $500 is appropriate.

**Izzy0906** · 08-05-2008, 01:00 PM

Originally Posted by Greebo

Dave says that when someone has an income of 25,000 or less, a baby EF of $500 is appropriate.

My income is almost double that.

**Greebo** · 08-05-2008, 01:14 PM

Originally Posted by Izzy0906

My income is almost double that.

Then I would recommend you stick with the $1000 baby fund.

Reason being is, Murphy events tend to correlate to lifestyle and income. If you have a genuine emergency which requires you to dip into the EF, you want enough in there for MOST cases to be able to take the hit from the EF w/o going into any more debt if at all possible.

"If you don't have that EF, and you start snowballing, not only will Murphy move in with you, but he'll bring his 3 brothers, Broke, Desperate, and Stupid." -- Dave Ramsey (paraphrased)

**Izzy0906** · 08-05-2008, 01:20 PM

Originally Posted by Greebo

Then I would recommend you stick with the $1000 baby fund.

Reason being is, Murphy events tend to correlate to lifestyle and income. If you have a genuine emergency which requires you to dip into the EF, you want enough in there for MOST cases to be able to take the hit from the EF w/o going into any more debt if at all possible.

"If you don't have that EF, and you start snowballing, not only will Murphy move in with you, but he'll bring his 3 brothers, Broke, Desperate, and Stupid." -- Dave Ramsey (paraphrased)

It would take me 10 months to do that. I only have $100 extra/month to put towards "extra" snowballing. I think I'm going to do the $500 over the next 5 months and then pay off debt and be done with that within 2 years and then build up the emergency fund. But I will keep that advice in mind. Thanks! Always appreciate help from you

**Greebo** · 08-05-2008, 01:28 PM

Originally Posted by Izzy0906

It would take me 10 months to do that. I only have $100 extra/month to put towards "extra" snowballing. I think I'm going to do the $500 over the next 5 months and then pay off debt and be done with that within 2 years and then build up the emergency fund. But I will keep that advice in mind. Thanks! Always appreciate help from you

Honestly? I don't think you're likely to stick to the plan in that case.

I invite you to prove me wrong - but 5 months with no real visible progress? You're going to be demoralized, you're going to be depressed, and you're going to want to quit. It'll be like dieting for a month and losing 0 pounds - you'll quit the diet, cause it won't feel like its working.

Have you posted your budget details? Is there something you can sell? Can you boost your income somehow? Can you sell some stuff? What can we do to get that EF up in short order?

**Izzy0906** · 08-05-2008, 01:29 PM

Originally Posted by Greebo

Honestly? I don't think you're likely to stick to the plan in that case.

I invite you to prove me wrong - but 5 months with no real visible progress? You're going to be demoralized, you're going to be depressed, and you're going to want to quit. It'll be like dieting for a month and losing 0 pounds - you'll quit the diet, cause it won't feel like its working.

Have you posted your budget details? Is there something you can sell? Can you boost your income somehow? Can you sell some stuff? What can we do to get that EF up in short order?

I already work two jobs and I posted my budget... and you told me to do $500 over the next 5 months, then gave me what order to do the other debts in.

**Izzy0906** · 08-05-2008, 01:30 PM

This is actually your plan I'm putting into affect lol

**Greebo** · 08-05-2008, 01:34 PM

*rofl* Ok - well stick to it - and prove me wrong!!

Greebo goes off to find the plan he posted and re-read what he said.

**MomToTwoBoys** · 08-05-2008, 01:36 PM

Originally Posted by ladykemma2

suggest going to dave ramsey's web site and reading reading everything he says,and listening to his free radio archives.

baby step 0.5 stop using credit cards
baby step 1 baby emergency fund 1000 dollars
baby step 2 snowball debts
bab step 3 3-6 months of take home pay or expenses (add mary hunt's idea of contingency fund /sinking fund here)
baby step 4 15% to retirement
baby step 5 save for kids college
baby step 6 pay off mortgage
baby step 7 live life

God that's alot. For baby step 4: What if both DH and DW are getting pensions? I get a pension now from the Marine Corps and DH will be getting his RRSP. Do we include that into the 15% to retirement? What if we want to put into an RESP (Registered Education Savings Plan) or move to a Spousal RRSP (where DH's RRSP is deferred that year to my RRSP that he makes over a certain amount of income so that we get taxed less)?