This article is part two of a series I’m writing explaining exactly how my family and I paid off over $90,000 of consumer debt in less than two years.
As I mentioned in the first article, opening up our financial records to the rest of the world for the purpose of explaining how we paid off a large amount of debt was a little unnerving.
The table below lists my family’s outstanding debt as of 12/25/2003 before we started our debt snowball repayment plan.
Perhaps you have a similar amount of debt, perhaps you have more. Either way, my goal in sharing our debt freedom story is to help inspire and motivate others that it is possible to pay off your debt with intense focus and an effective repayment strategy.
The Proverbial “Stick of Dynamite”:
Best selling author and syndicated radio talk show host Dave Ramsey is a huge advocate of the debt snowball repayment plan. Although he did not “invent” the debt snowball technique, the systematic plan of debt repayment is most often attributed to him.
Ramsey strongly encourages people to pay off the accounts with the lowest balances first (regardless of interest rates). These “quick wins” help build the momentum necessary to continue with the debt snowball plan when focusing on the larger (more tedious) debt accounts as the snowball continues to roll.
To help get your debt snowball rolling, Dave Ramsey encourages readers to find a “stick of dynamite”. The dynamite he refers to is a large chunk of money to apply to your first month’s debt snowball payment. From selling an ATV or boat you no longer use, to cashing in some stock, kicking off your debt snowball with a “bang” will greatly improve your chance of successfully becoming debt free.
I was fortunate to have some money saved in the form of my company’s stock that I had purchased as party of my company’s Employee Stock Purchase Plan (ESPP). After brokerage fees and income taxes, I cleared about $16,000 from the stock sale which I immediately applied to my outstanding debts.
The First Three Debt Accounts Go Bye Bye:
The proceeds from the sale of this stock, along with cutbacks in other areas of our lives (dining out, entertainment, trips to the mall, etc) enabled my family and I to pay off our first three account balances from our list on January 29, 2004 (see table to the right).
We paid off our Citibank Visa Card, our American Express Card, and the remaining balance on my Honda Finance Motorcycle Loan.
This move left us with $71, 447 of debt remaining to be paid off. Unfortunately, we had no additional money saved up to “easily” pay off our remaining debt and the rest of our outstanding balances were going to require hard work and more sacrifice.
Click here to read part three of this series.
Too Much Debt? Download our free Trees Full of Money Debt Snowball Calculator and see how quickly you can pay off your debt.