Let me start off by saying that when I began my journey to financial freedom, I’ve tried many debt repayment plan templates. The only one that helped me pay off more than $26,000 was the Debt Snowball Method.
Here’s the reasoning of why the Debt Snowball Method works (quote from Dave Ramsey):
“The point of the debt snowball is behavior modification. If you start paying on the largest debt, you won’t see it leave for a while. You’ll see numbers going down on a page, but that’s it. Pretty soon, you’ll lose steam and stop paying extra, but you’ll still have all your debts hanging around.
But when you pay the small debt off first, you see progress. That one debt is out of your life forever. Soon the second debt will follow, then the next. When you see that the plan is working, you’ll stick to it. By sticking to it, you’ll eventually succeed in becoming debt-free!”
As much as I love this method and reasoning, I did not care for the available worksheets online and their formatting. So, I created my own. I have included the template I used and still use along with the directions so you can try this method too!
- Purchase your Ultimate Financial Planner.
- List all debts in your name… smallest current balance to largest current balance in the table on the next page. If you are married, list all debts you two have in both of your names.
- Fill in the interest rates and minimum payment amounts in the table.
- Review your budget and determine how much money you are going to allocate to your debt repayment after you have paid all of the minimum payments on each debt.
- Pay all the minimum payments on each debt monthly.
- Beginning with the Debt #1 on the list, add the money you have allocated to debt repayment + minimum payment to calculate your new Total Monthly Payment. (ex. If you have a minimum payment of $50 on your Visa Credit Card and you have allotted $200/month to your debt repayment plan, your total monthly payment for this debt is $250).
- Pay the Total Monthly Payment amount until Debt #1 is paid.
- Then, determine the Total Monthly Payment for Debt #2 with the same process as Step 5.
- Continue down the list until all debts are paid.
- Celebrate…This is a major achievement!
I hope the Debt Snowball Method helps you attain financial freedom like it is helping me. Grab The Ultimate Financial Planner now to begin your debt repayment planning!
Question: How much debt have you paid off to date? Leave your response in the comment section below.