I totally agree (for me) with the Debt Snowball! I love it. Its great to see debt by debt disappearing and being deleted from the total I owe. And the difference in interest for me (total over repayment time) is about 1/4 of the amount I pay monthly on the debt to have it gone! Having said that I don’t have any really high interest debts so for me its not so bad.

The first thing that we did of course was to stop all spending. Then we got caught up on the “living” bills that were behind -mortgage, hydro, phone etc. – while paying only the minimums on all the other debts. Nothing to the bank of Mom and Pop at first of course since they were the only ones not sending threatening letters – only doing that heavy sighing and rolling their eyes thing.

When we got caught up (and boy was that a relief and a sense of accomplishment) and started following a budget we started to pay off the other debts. We did what I have now learned is called the snowball plan. We paid the minimums on everything except the smallest debt and for that one we put as much on it as we could. When it was paid we moved on to the next smallest debt.

In the beginning it really never occurred to me to check out the interest rates. All I saw was the balance line and wanted to get something paid off as soon as possible so the smallest amount seemed the way to go.

We did this snowball thing until we had 3 debts paid off then I discovered Til Debt and learned not to be even stupider than I had been.

The first thing we did was to try to get a low interest consolidation loan but were refused because the Bank basically said that we had all the loans they were going to give us and that we had blown our chances. Condescending gits.

So then we transferred as many of the high interest credit cards to the lowest interest card as we could and I started calling the others asking for lower rates. Thanks Gail but da! why didn’t I think of that?

I was quite successful and got one lowered to 5% until the entire balance was paid off.

From that point on we paid the higher interest debts aggressively and paid the minimum on the lower ones.

I have to say that using the snowball method (pay of the lower balance amount debt first) was much more satisfying because we actually saw progress – and fairly quickly – however – the smart way is to pay off the higher interest debts aggressively because of course every month you are getting wacked with huge interest.

The high interest card that I eventually got down to 5% had $12,000 on it and the original interest rate was 24% so that was about $240 every month in interest. At 5% it was $50. We had another card with the same interest rate and we could not get them to lower it so they got all of our attention.

We used both methods of debt payment and both worked with different benefits. We all have to tweak our plans and go with what works and what keeps us motivated.

We took a long time to get debt free but never wavered (because I was just sooooooo scared about what we had narrowly avoided) but it was HARD and BORING so I have to agree with Gail – faster is better.

I set my first financial goal after becoming debt free of 6 months of expenses in an emergency fund by the end of 2010. I’m 20% there…

The letter writer should realise people survive just fine not buying new clothes. And that a brief high from shopping is nothing – and I mean NOTHING – like the long-lasting high from that final payment.

And I would like to share a new word with people; actually it’s an old English word.

Fornale: to spend one’s money before it has been earned.

May you only have to use it when referring to others.

“…if we completely stopped having any form of a life, we would still have at least 3 years left to pay down all our debt. ”

So, by their calculations, no matter what their intensity, they have a long way to go. In cases like that, I think it is worth paying a little more in interest in time to come up with something that is SUSTAINABLE for THEM. Otherwise, they ARE going to run out of steam no matter how much they want to get out of debt. It’s easy to stand back and say that they should just suck it up and not buy ANYTHING but necessities for the next three years, but that’s unrealistic for 99.9% of people. What they need is to find BALANCE so that they can keep going in the right direction.

I speak from experience here. My husband and I tried to just “stop spending” but we weren’t ready. Heck, we still aren’t ready to stop buying everything but necessities — and I don’t think we will ever be ready to do that, not for YEARS, at least. So, we’d try for a little while then end up feeling frustrated and go on a shopping binge, getting further into debt.

Now, yes, we are still in debt. And we will be for a few years at our current rate. However, we have an emergency fund, we’re putting a significant portion of our income towards the debt, and, most importantly, we are HAPPY with our lives NOW (which, by the way, means MUCH LESS “retail therapy”). That doesn’t mean that we don’t look forward to being out of debt. We do — VERY MUCH, in fact. However, we aren’t putting our lives on hold. Fortunately, we have found a lot of ways to cut costs as well as a lot of free and cheap ways to make our lives better so that we can achieve our goals without being miserable and still enjoying those indulgences that really do matter to us. And, as time goes by, we’ve learned new ways to be frugal and so are continuing to pick up steam.

Plus, another great thing about our pace is that I can truly see us keeping our current lifestyle long term, helping us build wealth after we’re out of debt instead of getting us back into debt. That’s perhaps the greatest benefit of finding a sustainable balance!

Bottom line, when you have BIG debt to tackle, what matters most is sustaining it till the end — not how intense you are over the short term. Slow and steady wins the race!

Whether irritation is the trigger or something else is, my guess is that goals are the motivation that will make the journey complete.

So set up three columns:
1- Debt (list each creditor, the amount, the interest rate)
2- State your goals (list the goal, the timeline, the costs IF there is a cost associate with the goal)
3- List that for which you are grateful (this should help you illustrate your value system)

The point is to get out and stay out of debt, regardless of why it was racked up in the first place.

So now we are trying to think about board game Thursday’s again…and make it a habit for our kids

I guess instant gratification got most people into debt, so why not get that same instant gratification by using the snowball approach. For the generation that only know to “buy it now”, instead of saving for it, this plan, may be the one they could stick to. IMHO.

Maybe being incredibly non-rational and paying more money needlessly on interest will get them out of debt, and being rational and paying the highest interest rates first won’t. In that case, whatever works – go for it.

But creating your own milestones would be much, much smarter.