Dave Ramsey Baby Step Two Explained

 Ok, if you are here you are trying to get out of debt.

The first step was to save $1,000 for your emergency fund.

Make sure you are current on all of your bills...make sure you and your family are taken care of before you dive into this. You need to have FOOD, SHELTER, UTILITIES, and TRANSPORTATION. 

Next, you sit down and make a full list of every single debt you have.

Now, Step Two of Dave Ramsey's Baby Steps:

Now it’s time to attack debt with a vengeance using the debt snowball method. Pay off one debt at a time from smallest to largest, gaining momentum until you’re debt-free.

How Does the Debt Snowball Method Work?

The debt snowball method is a debt-reduction strategy where you pay off debt in order of smallest to largest, gaining momentum as you knock out each remaining balance. When the smallest debt is paid in full, you roll the minimum payment you were making on that debt into the next-smallest debt payment.

Here’s how it works:

Step 1: List your debts from smallest to largest regardless of interest rate.

Step 2: Make minimum payments on all your debts except the smallest.

Step 3: Pay as much as possible on your smallest debt.

Step 4: Repeat until each debt is paid in full.

Now, before you start arguing about the interest rates, hear us out. If your largest debt has the largest interest rate, it’s going to be a long time before you start to see a dent in that crazy balance of yours. But when you stick to the plan (without worrying about interest rates), you’re going to be jumping up and down when you pay off that smallest debt super quick. That excitement is what’s going to motivate you to keep working hard—all the way to that debt-free finish line. But more on this later.

Make a chart to put on the frig if you need to. Write yourself motivational notes. The term snowball here is exactly right! You want to keep up intensity as you pay off that smallest bill first, and then move to the next one... I got a second job, I sold stuff...everything I could to pay off quickly.

I still say the most important thing is to stop spending leaks!