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Best Way To Get Debt Free Fast – As the holidays wind down, many of you are looking at your credit card bills and discovering all those holiday purchases. Debt can quickly spiral out of control. If you’ve made a few financial mistakes, it’s hard, but not impossible, to dig yourself into a hole. Alex and Cassie Michaels, the couple behind the popular blog The Thrifty Couple, learned this lesson the hard way and paid off nearly $100,000 over 3 years. I am amazed every time I hear their story and share it all in their new book, The 2% Rule for No Debt. They sent me their new book, and I was amazed at how many tricks I learned about paying bills and how interactive their stories were.
In our family of 6, we are always looking for ways to save money. I have made the mistake of falling into the credit card trap in the past and I remember well the weight it placed on my shoulders. When you’re in credit card debt, stress follows you everywhere.
Best Way To Get Debt Free Fast
Alex and Cassie Michael knew they were in trouble when their credit card declined while on vacation and they couldn’t leave their hotel. They took money out for their honeymoon, and that started a series of seemingly small decisions that ended up costing them nearly $100,000 in customer bills.
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Cassie tried to get out of debt by joining an MLM, but instead was encouraged to make investments she couldn’t afford. The businesses that are supposed to save them financially are actually putting them in debt and making their situation worse.
Their stories are very interesting. It was a bit like a novel, and I found myself dying to see how they would solve their financial problems.
What I love most about their story (and how they got out of debt) is that they don’t offer a solution that is impossible for others to copy. No advice on tight budgets, eating nothing but ramen, or living in your parents’ basement. What they offer is a great way to get out of debt by making small changes, every month, to make lasting changes.
To get out of debt (and stay out of debt), they recommend reducing your expenses by 2% per month and increasing your income by 2% per month.
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These small changes can really add up, especially when you start to get out of debt and can use the money you spent on the payment to pay off the rest of your debt.
If you’re trying to get out of debt or just want a book to give you a better perspective when making everyday financial decisions, I recommend The 2% Rule for Getting Debt Free. If you’re looking for a way to get out of debt for good, let me introduce you to your new DFBFF (Debt Freedom Best Friend): The Debt Snowball.
The debt snowball method is the fastest way to pay off your debt. That’s how I paid off $40,000 in client debt in just 18 months! But if it works for me, it will work for me
If you’ve followed Dave Ramsey’s 7 Baby Steps, you know that the second baby step is to pay off all debt (except your house) that snowballs with you. So, once you’ve cleared all your debt and saved $1,000 for your startup emergency fund, it’s time to build that snowball!
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The debt snowball method is a debt reduction strategy where you make payments from the lowest balance to the highest balance, gaining momentum as you eliminate each balance. Once the minimum payment has been paid in full, roll over that loan’s minimum payment to the next minimum payment.
Step 4: Take the amount you pay in the minimum payment and add it to your payment in the next minimum payment until it is gone.
As you eliminate your debt one by one, the amount you have to put aside for the remaining debt grows—like a snowball rolling down a hill (hence the name). And the thrill you get from paying the minimum bill quickly will motivate you to keep going to the finish line unpaid!
Snowball debt works because it’s about changing your behavior. Trust me, you don’t have to have a degree in finance or be an athlete to get debt.
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It’s more about equations than math. In fact, personal finance is 80 percent practice and only 20 percent basic knowledge.
You can even pay your bills. And if you believe that, you’ll start acting like it. That’s why it works for me. As soon as I saw that the small credit card charge was removed, I did a little dance (inside – you don’t want to see me dancing outside). And my brain is like
You may have heard of the debt avalanche system, where you pay down your debt from the highest interest rate to the lowest. But here’s the deal: If you start paying off your loan at the highest interest rate (which is usually your highest balance), it might be.
Soon you will lose your strength and maybe give up completely. Why? Because it takes forever to gain traction! You start with the hardest debt instead of the easiest. Plus, you’ll still have other pesky little bills to pay.
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And when you clear the minimum bill first, you’ll win fast! Debt is your life
. Soon the second bill will come and another and another. Suddenly, you’re paying a monster bill for your last few bills — instead of just surviving on your minimum payment.
Once you see your debt snowball working, you should be able to stick with it. And the next thing you know, you’re yelling, “I’m not in debt!”
Now let’s see an example of how this method works in real life. In this case, you have four different costs:
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$500 health bill – which you fight with a vengeance. Let’s say you’re focused on your goals, so you have a side challenge that snowballs an extra $500 a month.
Since you pay $550 a month in medical bills ($50 minimum plus $500), that bill will be completely gone in one month. Success! Now you can take that freed $550 and apply it to your credit card bill, paying a total of $613 ($550 plus the $63 minimum payment). In about four months, you’ll say goodbye to credit card debt.
Next, you’ll end up with a $748 monthly car loan ($613 plus $135). In less than 9 months, you’ll be driving off into the sunset with the car you actually own.
When you get to your last (and big) bill, you’ve made enough money and decide to cut your expenses even more, giving yourself an extra $100 a month. So now you can put $944 a month toward those dreaded student loans! With a big payout like that, you’ll be sending Sally May packing in just nine months.
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Do you now see why debt snowballing is the best payment method? Paying in the right order, snowballing, and focusing on your goals will pay off $20,000 in less than 24 months, even faster!
The debt snowball process works. But frankly, it’s not a cake walk or a walk in the park. It’s really not cake or walk here. It takes hard work, dedication, budgeting, and constantly telling yourself:
If you’re ready to get out of debt once and for all, check out Financial Peace University (FPU). You will learn how to snowball everything
Your work is fast. More. When. And that was the class that helped me go from broke to millionaire within ten years.
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The best part is having a community of travelers like you! Answering questions with this encouragement will help you stay motivated until you make that final payment.
Listen, the average family using FPU pays $5,300 in the first 90 days. This is not a crazy change! So enroll in FPU courses today.
Just like a snowball rolling down a hill, you can get paid. And when you’re debt-free, you can save for the future and build the life you really want.
George Kamel is a personal finance expert, certified financial coach through the Ramsey Financial Coach Master’s Training, and national columnist. George has been with Ramsey Solutions since 2013, where he speaks, writes and teaches about personal finance, investing.
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