Debt Payoff

  • How To Set Up A Debt Snowball

    There are many reasons to pay off debt and there are almost as many ways to successfully create a debt payoff plan. The debt snowball plan of paying off debts is a great system front-loaded with rewards and positive psychological wins that has helped millions of people pay off debt.

    With the debt snowball you attack debt by tackling the smallest obligation first. You then roll that payment amount into tackling the next largest debt. You continue this process knocking off bigger and bigger debts with a larger payment amount, just like a snowball rolling down a hill.

    Why the debt snowball works

    The debt snowball is derided by many as the worst way to repay debt because it doesn’t take interest rates into account. This means for many people it is not the best mathematical choice. So why does the debt snowball method work so well for people paying off debt?

    The debt snowball method works well because the small victories people achieve up front when paying off debt. For many people seeing those small debts paid off quickly helps keep them engaged and ready to tackle bigger challenges.

    The debt snowball might not be the best way financially to pay off debt compared to a technique like the debt avalanche strategy, but it uses psychological strategies that work for many people.

    how to set up a debt snowball method plan

    How to set up a debt snowball

    Setting up a debt snowball is actually very straightforward. There’s only 5 steps to setting up and completing a debt snowball.

    Step 1: To start you will list all of your debts from smallest balance to largest balance regardless of interest rate.
    Step 2: Make minimum payments on all your debts except the smallest debt balance.
    Step 3: Pay as much as possible on your smallest debt balance until it is completely paid off.
    Step 4: Take the minimum payment from the previous loan and all your extra income and apply it to the next largest debt balance.
    Step 5: Repeat until each debt is paid in full.

    There are many examples online of setting up a debt snowball to repay debts.

    When we starting paying off debt together my husband and I set up our debt snowball as follows:

    • Loan 1: $1,043.99
    • Loan 2: $5,400.05
    • Loan 3: $5,792.96
    • Loan 4: $31,129.13

    Total debt: $43,366.13

    You can see how we worked through the debt snowball with our debt snowball playlist where we adding videos showing our progress working through the debt snowball.

    The debt snowball method worked well for me when I paid off $22,000 in student loans and $5,000 in credit card debt in my early 20s so I knew that the method would work well for me again. While the interest rates of our newer debt snowball meant the lowest interest rate debt would be paid last, I knew the method was effective.

    If you want to see how long it will take you to pay off your debt using the debt snowball method, you can use a debt snowball calculator is a great way to see how quickly a debt snowball can get you out of debt.

    Using the debt snowball method

    Using the debt snowball to pay off debt is very simple in practice and works well for many people.

    The first step is to make sure you are covering the minimum monthly payments on all of your debts. You should not stop paying your debts unless you are unable to cover you basic living needs like rent or food.

    After you’ve covered all the minimum payments on your debts, you work on attacking your debts in the order of the debt snowball list you’ve created. You will send all your extra money toward that first smallest debt.

    Every single month you will put all your extra money budgeted for debt payoff toward your smallest debt. You do this even if you are paying more interest on a different one due to interest rate. Once you’ve paid off the smallest debt you then take that entire amount and send it to the next smallest debt.

    Rinse and repeat by knocking off debts from your list and then sending all the freed up money toward the next debt in line.

    In practice the debt snowball might look like this: you have a dental bill for $1,000 that you are paying interest-free, and two credit card bills for $5,000 (at 22.9% interest) and $1,500 (at 15.9%), and a student loan at $26,000 (at 6%). With the debt snowball you’d pay the dental bill first. Once you completed that loan you’d move on to the $1,500 credit card and then the second credit card and finally the student loan.

    With the debt snowball you may end up paying off interest-free loans before you tackle the bigger interest debts.

    If the debt snowball method makes you crazy because of the interest rates, you may want to consider the debt avalanche method or a debt consolidation loan.

    How to make the debt snowball work for you

    Once you’ve got your debt snowball set up you can set about the business of making the debt snowball even more effective.

    First, make your budget and see how much extra money you have to put towards the debt each month above the minimum payments. That extra money is how you will eliminate the debt that you are tackling.

    Next, find ways to free up even more money for your debt snowball. You can do this one of two ways: increasing income or decreasing expenses. You can decrease expenses by eliminating bills or living frugally or giving yourself less spending money each month. You can increase income by doing a side hustle or by increasing your income at your regular 9 to 5 job.

    Your debt snowball will be most effective when you are able to find even more money to throw at the debt each month. The more money you put toward your debts, the more you will progress in the snowball and the faster it will go.

    My favorite way to increase the effectiveness of a debt snowball is to use these spots of found money to make debt snowflake payments. The small daily savings and “found” money that you can add to the debt repayment in terms of debt snowflakes can truly add up and make a difference.

    Is a debt snowball right for you?

    When choosing your debt repayment method you have to select the right method for you, whether that is the debt snowball or the debt avalanche or another method.

    Using a debt snowball calculator will let you compare the different options and decide which method is the best for paying off your debts.

    It can be tempting to go with the debt avalanche plan for paying off debt but you have to think about more than just the numbers. You know yourself and how you handle money and what motivates you. The best debt payoff plan is the one that you will stick with. A debt payoff plan does you know good if it is mathematically the best choice but you abandon it. That’s why the less financially effective method of the debt snowball might be the best one for you – because it includes motivational wins that help you stick with it.

    For me, I like breaking down larger goals into smaller ones. Having more frequent milestones and payments is motivating to me. (It’s also why I combine the Weekly Transfer Method with the Debt Snowball.)

    Breaking down large goals into smaller subgoals can help you stick with an overall plan. This is especially helpful if you think it will take years to pay off all your debt.

    If you think the debt snowball method will motivate you to pay off debt, then that is the method you should choose.

  • 2 Easy Ways To Pay Off A Mortgage Faster

    Paying off your mortgage faster doesn’t have to include crazy schemes or huge extra payments. In fact, it can be very simple.

    We are paying off our mortgage faster and saving thousands in interest by using two simple techniques.

    Today I’m breaking down our monthly mortgage statement to show you how much we pay per month toward our mortgage, how much we’ve paid off in the first three years of owning our home, and the 2 ways we speed up our mortgage payoff every month.

    A monthly mortgage statement provides essential information about your monthly payments and your mortgage balance. It’s the key to seeing your mortgage payoff progress.

    If you aren’t taking the time to open up your statement each month and see where the money is going, you should do that this month! Take a look at where your money is allocated and see how much is actually going toward your mortgage balance principal. If you bought your house recently then it probably isn’t much!

    Our Monthly Mortgage Statement

    In the video above I break down what exactly we pay each month toward our mortgage according to our mortgage statement.

    Our monthly payment is $1,128.36 which is broken down as:

    • Principal – $273.96
    • Interest – $426.52
    • Escrow – $427.88

    Because we round up to $1,200 for our monthly payment, we also send $71.64 to principal payments each month. This is one of the ways we are paying off our mortgage faster.

    That means each currently $273.96 + $71.64 for a total of $345.60 goes towards our mortgage principal each month.

    Escrow is the part of the mortgage payment that handles paying for mortgage-related items. These expenses are necessary with a mortgage and include things like property taxes and homeowners insurance. These things are only usually due once a year but most mortgage companies require you pay monthly installments to make the large yearly payment. It’s like a sinking fund that the mortgage holds for you in an escrow account. The mortgage lender makes sure these expenses are paid by paying them our of your escrow funds.

    2 Ways To Pay Off The Mortgage Faster

    We’re paying off our mortgage with zero extra effort or pain thanks to a couple small decisions.

    1. Rounding up our payment.

    Our mortgage payment is $1,128 a month but we made the decision to round up to $1,200 for our payment. This means each month roughly $71 is going directly to pay down the principal of the mortgage. Rounding up doesn’t hurt our budget overall but it guarantees each month we are sending extra money to pay off our mortgage.

    That doesn’t sound like much when we are throwing $71 a month at a $141,000 debt. but when you multiple that $71 by 12 months, we send $852 a year to the principal of the mortgage. That will definitely speed up the payoff process!

    Rounding up your mortgage payment to the nearest $100 dollar amount makes it an easy and painless way to quickly pay off your mortgage faster.

    2. Biweekly mortgage payments.

    We’ve set up our mortgage with biweekly payments to pay off our mortgage faster. This pays off the mortgage faster because you are actually making 26 payments a year but you only need to make 24 to cover the 12 months of mortgage payments. That means the extra 2 biweekly payments are applied to the principal as one FULL PAYMENT extra per year.

    On our biweekly schedule we have a “half payment” of $600 go fully toward principal around May and then again later in the year. This adds up to one full payment going straight to paying the mortgage down faster.

    Most mortgage servicing companies allow you to set up a biweekly payment plan where you have an extra payment per year which drastically speeds up your repayment of your mortgage.

    Those are a couple of the ways we are paying off our mortgage faster and how much we’ve paid so far!

    How Much We’ve Paid Off In 3 Years

    In the roughly 3 years since we bought our house we’ve made a lot of payments, but have we made any progress paying down our mortgage?

    Mortgages are set up so you pay more interest in the beginning so a large chunk of each mortgage payment goes toward interest. Despite this we have managed to pay off thousands from our mortgage so far.

    • Home purchase price:  $158,900.00
    • Mortgage start:  $153,596.00
    • Mortgage current:  $141,194.46
    • Mortgaged reduced:  $12,401.54

    In the video below you can see how we’ve paid off more toward our mortgage by the mortgage payoff strategies.

    Paying off a little bit extra each month moves us much further down the schedule of debt to pay. By utilizing these small mortgage payoff strategies we are drastically speeding up our mortgage payoff without feeling any pain!

    We made a few mistakes buying our first home so we are making up for it by easily paying off our house faster.

    Should You Pay Off Your Mortgage Faster?

    Depending on which financial advisor you ask, paying off your mortgage is a good idea or a bad idea. Arguments can be made for both options.

    In reality it depends on your financial goals and your risk tolerance level. Many people find that paying off the mortgage brings a huge amount of relief and peace of mind when you don’t have a monthly mortgage payment. The security of owning a home outright can be a huge positive for many people.

    Paying off your mortgage also saves you money. You’ll save a ton in interest even with a small interest rate because the faster you pay off your mortgage the less interest you will pay on the loan.

    Having your mortgage paid off also gives you more options. You’ll have extra money each month that you could use to save toward retirement or go on vacations or build wealth and achieve financial independence! Paying off your mortgage early is an amazing way to build your wealth and gain financial independence.

    In the end, paying off your mortgage gives you more options and more freedom. Who doesn’t want that?

  • Should You Go on Vacation While Paying Off Debt?


    Should you take vacations while you are paying off debt? If you are super focused on getting out of debt then is it worth it to take a vacation?

    I recently took a vacation with my mom, but I haven’t forgotten about paying off debt! I’m sharing my reasons why we took this vacation, ways to make it cheaper and ways to make it work while paying off debt.

    I plan on taking vacations and enjoying them where I can but I also know that keeping things on a budget and staying on the frugal side of traveling helps make it possible while you are still paying off debt.

    In the video I share a few of the ways we were able to take thing vacation while paying off debt thanks to some budget tips and tricks for traveling.

    Why I Think You Should Take Vacations When In Debt

    Personally, I think you should still travel even if you are paying off debt.

    Some money experts recommend skipping vacations while you are paying off debt. Personally I’ve struggled with that concept and always traveled in the past when paying off debt. I still plan on traveling and taking vacations while paying off debt because it’s important to me to enjoy life and find the balance between enjoyment and smart personal finance moves.

    Life doesn’t end just because you are trying to get out of debt.

    Reasons why you should take vacations while in debt:

    1. You’ll have the chance to relax and refocus on your goals.
    2. You will be even more motivated to attack your debt after the trip.
    3. You can still take a trip without delaying debt payoff too long.
    4. You are not promised a future so you need to live in the moment too.
    5. Vacations can be done on the cheap and still be fun.
    6. People value experiences like vacations more than things.

    Those are just a few of the reasons I personally found my recent beach vacation was worth it to us. This is definitely one area where I disagree with Dave Ramsey. I still think you can go on vacations while you are in debt.

    If you want to take a vacation while you are still paying off debt there are ways to make it work!

    How To Decide On Taking A Trip

    If you’re on the fence about taking a vacation during your debt payoff season, there are a few ways to decide if the trip is worth it for you or not.

    Here are a few questions to ask yourself if you are trying to decide if you should travel when you are in debt:

    • How much longer will you be paying off the debt if you take the vacation?
    • How many months will it take you to save up for the trip?
    • Can you save for the trip and not use credit for it?
    • Will you stick to your vacation budget while traveling?
    • Is it a once in a lifetime opportunity like a family wedding?
    • Is your debt high interest or are you already drowning in payments?

    Those are a few of the questions you should ask and answer for yourself before deciding to take a vacation.

    Tips For Traveling When In Debt

    If you are in debt but still want to travel, know that it is possible! You may have to go about it a different way by lowering the cost of your trip in a variety of ways, but you can still get away and enjoy some relaxation. Paying off debt doesn’t have to mean no travel and no fun!

    Split expenses with family. If you split the overall costs of the vacation between multiple family members or friends then you will spend less overall. Splitting an AirBnB or adding multiple people to a hotel room is an easy way to cut expenses while traveling.

    Stay in a less expensive area. When you take a trip stay in a less expensive area of the city instead of staying downtown in a nice hotel. Find ways to make it cheaper by adding some commute from your hotel to the fun destinations.

    Go for a shorter time period. Maybe you can’t take a week or two week long vacation with your budget and debt payoff situation. But you could shorten the time span of the trip for a less expensive vacation which makes it more doable.

    Make a budget for the trip. It is very easy to overspend while traveling so make sure you make a budget for the trip and track your spending while you travel. Having a plan for your money while traveling will make you feel more in control.

    Save up the money you need before you go. You should never, ever go into more debt in order to travel. While traveling is wonderful, it is not worth more debt, especially if you are using credit cards to fund the trip. If you are going to take a vacation then you should save up the amount you need to spend before you actually go.

    Start a side hustle to pay for the trip. Pick up extra work to earn money outside of your regular budget and debt payoff plan in order to pay for a vacation. There are tons of side hustle ideas out there from driving for Uber to selling on Etsy to walking dogs and beyond. If you need money outside your budget to travel – start hustling to earn it!

    Plan for cheaper meals at your hotel or rental. While part of traveling is all about eating new things and trying new restaurants, make sure you plan for cheaper meals at your hotel too! If food isn’t important to you then this is easier and you could even plan to get groceries and make all your meals at your hotel.

    Find free things to do on your trip. There are free things to do in every city including the one you are traveling to for vacation. Look into local city guides and blogs to find out what locals are doing for free or if there are any fun events to check out while you are in town.

    Try a staycation instead. If you don’t actually want to spend all the money on traveling then try out a staycation! Don’t tell anyone you are staying home and avoid any obligations on your calendar. Instead explore your city and do new things, relax at home, and don’t do anything like chores.

    There are many ways to keep trips on the cheaper side which lets you still get the rest and relaxation you need during debt payoff without breaking the bank.

    The Argument For Not Going On Vacation When In Debt

    Of course, as a personal finance blogger I still have to make the argument for when you should not go on a vacation.

    Travel can be very expensive and many people tend to slip on vacation budgets and spend more than they planned. It’s very easy to incur additional costs when you are traveling that were not planned.

    If you are already in debt, especially credit card debt, then you probably don’t need the temptation to spend while on a vacation. If you have high interest debt like credit cards then you should tackle that like it’s an emergency before considering a vacation.

    ‘Regardless of the type of debt you have, remember that additional expenses like a vacation and additional debt will make achieving debt freedom even more difficult. It will take longer and depending on the amount spent or debt incurred while on vacation, it could make your debt payoff situation much worse.

    If any of these fit your situation then you probably should avoid vacations and any type of travel until your high interest credit card debt is gone.

  • 10 Best Reasons To Get Out Of Debt


    Debt hangs over people. Sometimes it even destroys lives. For most of us though, debt controls our decisions and limits our choices.

    For most of us we can push it to the back of our minds, but it rarely leaves us untouched mentally.

    We still feel the stress and anxiety of having debt lurking around in the background. We weigh our decisions in our careers and with our families based on our ability to pay the debt payments we’ve agreed to.

    Getting out of debt offers freedom from the burden and stress debt brings into our lives.

    Reducing your debt and paying it off completely opens up choices and freedom to do what you want most in life. It makes managing your money less stressful and it gives you the chance to do more with your life.

    Paying off debt has a ton of other benefits so today I’m sharing 10 reasons you should get out of debt.

    1. Reduced Stress

    Living with debt is stressful. End of story, we could probably stop here, right? Most people that find me online tell me that debt stresses them and causes anxiety.

    You worry about paying the bills and what will happen if you lose your job or if you should feel guilty about spending money. The constant pressure of needing to work to support debt payments can cause massive amounts of stress.

    Those with high debt levels have stress levels 12% higher than the average person (https://news.northwestern.edu/stories/2013/08/high-debt-could-be-hazardous-to-your-health) and getting into debt beyond your ability to pay is one of the top five most stressful life events according to the Society of Occupational Medicine. These levels of stress are not healthy for your body and could literally shorten your life.

    Becoming debt-free can help you save your life by reducing stress and preventing the serious health consequences that come from constant stress. Getting rid of debt lets you feel less trapped and that feeling along with fewer bills reduces stress.

    This stress relief from the removal of debt can make your life happier and longer.

    2. Better Mental Health

    Unfortunately debt is linked to worse mental health. I shared my own family experiences with the links between debt and depression so I know this story all too well. Even if debt doesn’t make you depressed, it can worsen depression symptoms.

    A Northwestern study found people with a lot of debt were 13% more likely to have depression symptoms. Other studies have found similar results especially when the debt is higher.

    Even worse, for some people like my half-sister, large debt loads that feel overwhelming can lead to suicidal thoughts. Unfortunately some people act on these thoughts and end their lives due to the crippling effects of debt. While that isn’t a good solution for the problem of debt, it does sometimes happen.

    Thankfully getting rid of debt leads to better mental health. Improving your mental health can also help you tackle the debt you need to repay. These go hand in hand and are worth working on.

    When you are debt free you are less likely to suffer from anxiety or depression. People report being happier with their life as a whole when they are debt free.

    The feeling of knowing you own your car and house and don’t have any payments can be a huge boost to your mental health and happiness.

    3. More Free Income

    Beyond the psychological factors of reduced stress and better mental health, getting out debt just gives you more money to play with! This can make your life more fun!

    When you have debt payments you are sending money to lenders instead of being able to spend it on things that you love. Getting rid of the debt might be hard in the short term but long term you free up more money to live the lifestyle that makes you happiest.

    When you pay off debt early and get out of debt you’ll have more money each month in your budget. If you don’t have to pay $350 toward a student loan payment every month, wouldn’t you be able to spend that money in a way that improves your life?

    If we weren’t paying a $1,200 mortgage payment each month we would have over $14,000 more in our budget each year to spend. That would buy us a lot of awesome things or multiple amazing vacations each year.

    4. Less Risk

    When you are in debt, you are taking risks with your money. You are betting on your ability to pay back the debt you’ve taken on. That involves risk.

    It might not feel that way since debt is so normal in our society, but if you are in debt and don’t have savings you are one emergency away from disaster. And if you are unable to meet payments on your debt you could end up in collections or bankruptcy or lose your house or car. There is a lot of risk involved when you owe someone money.

    Reaching debt freedom removes these risks. A lender can’t come after you for non-payment. A mortgage company can’t foreclose on your house if you don’t have a mortgage. It gives you less risks of financial ruin when you don’t have debts.

    5. Better Future For Kids

    Your kids will have a better future if you are out of debt. If you are a parent like I am then this is a huge motivator to get out of debt.

    There are multiple ways getting rid of debt improves the lives of your children. First, there will be the freed up income that you can spend on your kids and their needs. Also, you can also better save for their actual future by putting more money into a college savings fund or funding accounts for things like their first house or their first car.

    Getting rid of debt also makes you a better parents because it improves your emotional state and mental health. Bettering these things makes you a better person and a better parent.

    Debt freedom reduces stress so you’re going to be a more pleasant person and your kids will benefit from that as well. They also benefit from a parent that can teach them about money and show them how to do it the right way and avoid massive debt.

    Giving my daughter a better financial start and a better life overall is a huge reason why I want to get out of debt.

    6. Stronger Marriage

    Marriages struggle under debt and money problems. Money fights are common among couples that get divorced and the strain of not being on the same page financial can add unnecessary stress to a marriage.

    The stress caused by the effects of debt can cause couples to be irritable and zap the loving feelings right out of the relationship. Fight about money can lead to tension and even divorce when the debt isn’t addressed.

    Getting on the same page financially and getting out of debt removes one area of potential conflict from your marriage. The more areas of conflict you can work through or eliminate, the better your chances of a happy marriage.

    Working through the process of getting rid of debt also creates a stronger marriage because you’ve worked on a big problem together and succeeded. Tackling a shared enemy like debt can create a strong bond between you as partners.

    Paying off debt and working as a team with my husband to pay off our debt has helped us better communicate and has strengthened our marriage.

    7. Ability to Retire

    If you’re in debtm then chances are you aren’t saving enough for retirement because you’re busy paying off debt. Debt can often slow down or prevent people from saving as much for retirement as they should be saving.

    Getting rid of the debt means you have more money freed up to save for retirement by investing. Even if you’d rather not work until you die, you should be saving for your golden years to give yourself more choices. There is nothing worse than being 70 or 75 and being forced to work when you’d rather not.

    The faster you get rid of debt, the faster you will be able to save more for retirement. Without debt holding you back you could even try to retire early instead of working well into old age. Personally I’d love to be able to retire from work I don’t love so getting out of debt is part of my plan to achieve that.

    8. Ability to Help Others

    Getting rid of debt gives you the opportunity to help others more often.

    My favorite thing about Dave Ramsey’s show is that he paints the picture of getting out of debt and building wealth so that you can not only enjoy it for yourself but use it to help others in life.

    Getting rid of debt makes it possible for you to help other people when they needs it most. You can help friends and family get through a tough period financially and you can donate more to the charities that matter to you most.

    Research has shown that spending money to help others is a very rewarding experience. Often people find giving money just as rewarding as they would spending it.

    I love knowing my money is helping change lives and make the world a better place – I want to do more of that when I’m debt free!

    9. Guilt Free Spending

    Let’s be honest, even when you have a budget and plan for expenses you still feel a little guilty spending money on things when you are in debt. There is the angel on your shoulder telling you that your spending money could be sent to debt.

    I sometimes feel guilty even when I’ve saved for something and I see the benefits of what I’m buying. It’s hard to fully 100% enjoy spending money without guilt when you are paying off debt.

    But getting rid of debt gets rid of all that guilt and mental baggage around spending. Having no debt frees you up to spend what you want on whatever you want!

    When you are in debt you might not even have the money to spend, guilty feelings or not. This can lead to spending on credit leading to more debt and a vicious cycle. Getting rid of debt for good takes you out of the cycle and you can use your money for guilt free spending on the things you enjoy.

    10. Freedom

    Reason #10 to get out of debt? Freedom.

    Not having debt obligations gives you a huge amount of freedom and confidence. When you don’t have to work your butt off at a job you hate to pay debt, you’ve truly achieved a level of freedom most people don’t reach.

    This is a huge personal reason to get out of debt for me. I want to be free from owing anyone anything. I want to be free to make my career choices not based on how I’ll be able to service debt payments but instead on how it affects the rest of my life.

    Getting rid of debt gives you much more freedom in your life. It opens up more possibilities because you’re reduced expenses means you can change jobs or move or for some people even stop working.

    Getting rid of debt gives you freedom. That’s what I want. That’s why I’m getting out of debt and that’s why I’ll never take on more debt outside of mortgages.

    Why Get Out Of Debt

    This video and post about reasons to get out of debt was a collaboration with two of my favorite YouTubers: Kate Kaden and Well Behaved Wallet!

    These ladies also created videos about why to get out of debt. You can watch their videos below to learn their reasons why to get out of debt and follow their channels for great frugal tips and personal finance advice.

    Clearly we have overlapping and different reasons to get out of debt!

    Regardless of the specific reasons, it’s clear that eliminating debt is a worthwhile pursuit. That’s why I’m using the debt snowball to get out of debt in order to do things like invest money and purchase real estate!