Baby Step 2: The Debt Snowball
As a child of Sunny South Africa I have no idea what a snow ball looks like in person – I have heard that they can accumulate more snow and grow in size as they roll faster and faster downhill.
This is the premise behind Dave Ramsey’s Baby Step 2: The Debt Snowball.
How does the Debt Snowball work?
- Make a list of your total debts, smallest to largest, and start paying them off in that order.
- Don’t look at the interest rates when listing your debts, unless two debts are about the same size, then pay the one with the higher interest rate first.
- The snowball should include all your debts except your home loan.
This step is all about gaining momentum. The battle to get out of debt is 80% behaviour and 20% head knowledge, so we need to start FEELING the victories as soon as possible.