Implementing the Debt Snowball: A Personal Journey

This is the second of a five-part series about the “stages” of personal finance. Last Sunday, I shared part one: “Fumbling in the Dark”.

In June of 2004, Kris and I bought a new house. On paper, we could afford the upgrade. In reality, things felt pinched. For one thing, my consumer debt had grown to over $35,000. The increased housing payments didn't help. But the straw that broke the camel's back was the extensive remodeling ahead of us.

I have a vivid memory of sitting in the corner of a buffet restaurant, eating lukewarm lasagna while scribbling numbers on a napkin with Kris. We were trying to calculate how much we could afford to spend on the house. No matter how we ran the numbers, we had $10,000 in projects we wanted to complete when we moved in, and an expensive bathroom upgrade the following year.

I felt sick. Where could I find money like that? I didn't have any savings. The only paths I could see led further into debt. I could foresee owing $50,000 by the autumn of 2005. I was no longer merely fumbling in the dark — I had fallen, and I didn't know how to pick myself up.

A candle in the dark
Soon after we moved into the new house, I complained about my financial situation to my friend Mistie. She listened patiently, and then she loaned me a book: Dave Ramsey's The Total Money Makeover. Dave Ramsey changed my life. The book was filled with stories of other people — regular people, just like me! — who had managed to overcome debt on average incomes. It was inspiring. “What have I got to lose?” I thought, so I implemented his debt snowball.

As I worked to repay my debt, I read a book another friend had given me: Your Money or Your Life by Joe Dominguez and Vicki Robin. This book also changed my relationship with money. It helped me to understand that when I spent money on comic books or videogames, I was literally trading time (or “life energy”) for Stuff. If I could reduce my spending on Stuff, I could have more time to do the things I wanted.

By sharing these books with me, my friends had provided a glimmer of light. I was still surrounded by darkness, but now I had a candle to guide my way. I was learning skills necessary to defeat debt and to build wealth. I had entered the first stage of money management.

The first stage
I didn't master these skills overnight. It took time. I made many mistakes along the way. I suspect this is the same for most who are trying to move from financial chaos to some sense of order. During this first stage:

  • I learned to cut back on things I once thought essential.
  • I paid down my debt, tentatively at first, but more aggressively as I gained confidence.
  • I developed the strength to resist impulse purchases and to conquer compulsive spending.
  • I began to save. Again, I started slowly at first, with just a couple of hundred dollars in the bank. And sometimes I would tap this for non-emergencies. By the end of the “first stage”, I had $1000 in savings, and I haven't touched the money since.
  • I discovered the lively art of frugal living.
  • And, most importantly, I began to think about my goals. Why did I want to earn money? What was I going to do with it?

A huge part of this first stage was learning to live with mistakes. It used to be that when I did something dumb with money, I let that mistake derail me. I'd give up. I'd feel bad for spending money on something, but my solution was just to spend more money. Obviously, it is best to avoid these sorts of mental lapses, but it's also important to be able to just move on, to vow to do better next time.

The first stage of money management is like learning to ride a bike. You fall down a few times, and you're often unbalanced and clumsy. It'd during this first stage that you need the most support. You're learning how to do this on our own. In later stages these skills will become habits, but at the start they take focus and energy. They take work.

For me, the first stage of personal finance definitely felt like work. Hard work. But it was rewarding.

A whole new world
Once I discovered that I had the power to control my personal finances, my attitude changed. Saving no longer seemed like a chore, but a reward. Repaying my debt was a slog, but it was a burden I was willing to bear. And the process of learning about money was fascinating, like discovering a whole new world.

In my mind, I was in the zeroth stage of personal finance until October 2004, when I first developed a plan to get out of debt. I was in the first stage of personal finance from then until my non-mortgage debt was eliminated in December of 2007.

What about you? Have you always had a good relationship with money? Or did you have a turning point like I did? How difficult was it for you to master the basic skills? At what point did you feel like you were leaving the first stage of personal finance? When your debt was repaid? When you had ample savings? Are there other skills you found useful during this period? What advice would you offer others who are struggling through these things today?

Note: This series is intentionally less “polished” than most articles at Get Rich Slowly. It's a chance for me to think out loud, to explore the stages of personal finance with you, the readers.

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Patrenia
Patrenia
11 years ago

I too had a wake-up moment after reading “Total Money Makeover”. I didn’t really know how to manage money. My husband and I were making pretty good money, but could NEVER save…something always came up. We read Total Money Makeover in January 2005..we implemented the plan by May 2005 and we were debt free (except for the house)in November 2008.

Aman@BullsBattleBears
11 years ago

Growing up my family really did not have much money so I guess I was forced to live as frugal as possible…however, once I started pulling in some money, there was a phase where I wanted and bought everything. It was not until the bills started coming where I realized I was heading down a very dark path. This was what pulled me back to being more financially responsible. I learned to treat my money like workers and kept a ledger to track their movements. I also become more of an active investor and learned the markets so I could… Read more »

Kelley
Kelley
11 years ago

My husband and I have been pretty responsible with money since we were married, vowing to quickly pay off what credit card debt we accumulated in college. We did that, but now we’ve been married almost 7 years and consistently carried other consumer debt like two auto loans and student loans. I recently discovered Dave Ramsey also and figured out if we buckled down we could pay off both car loans and student loans in 3 months! Geez why didn’t I do this before. I can’t wait to be debt free except our mortgage which we now want to pay… Read more »

Seeking Lemonade
Seeking Lemonade
11 years ago

Yes, it takes a lot of terror-awareness to face one’s fate.

It’s like I had to realize I was facing the terror of my reality before I was able to accept that things were bad and getting worse, and if I didn’t do something drastic, I was going to crash.

Like an addict who finally wakes up and says to himself: I need drug treatment or I will die.

Studenomics
Studenomics
11 years ago

My advice to friends is to tough it out for the period of time when you are paying off debt. The best motivation is having something planned, whether it be a vacation or time off from work. Either way the point is to have a reward for getting yourself out of debt. I know it may seem counter productive to spend money but sometimes financial decisions may be mentally dificult in the sense that you may lose hope. By having something to look forward to it makes the struggle a bit easier.

Steve @ Freedom Education
Steve @ Freedom Education
11 years ago

Hi JD, I sat down with a friend who is struggling with money two weeks ago. He’s working a regular job and wants to put some savings away for a new home and a vacation next year. When we went through his expenses/income he was really shocked. For instance he realized that he spends $300 on coffee and $150 on cigarettes each month!!! That woke him up. He immediately cut back on smoking and instantly cut back his coffee drinking. He now prepares his coffee at home. He made these changes immediately. I was really happy to help my friend… Read more »

J.D.
J.D.
11 years ago

@Steve (#6)
That’s awesome. I think many of us would like to know how you approached the conversation with your friend. Did he ask you for advice? Did you offer it? How did this work? Did you actually use receipts? Or did you just ask him to estimate his spending?

I think it’s great that you did this, but I wouldn’t know how to do it with my friends. As Kelley (#3 above) says, it can be frustrating when you see friends and family making mistakes you used to make…

ldk
ldk
11 years ago

Had a similar experience a few weeks ago with a girlfriend who is desperately in debt, and given that she can no longer use her house as an ATM she is finally being forced to pay the piper. In her case, she doesn’t have to give up coffee or cigarettes, but in my opinion move into a much cheaper house…I offered my opinion, but still feel she doesn’t ‘get it’…I feel like I am watching a slow motion train wreck–is there anything to do other than ‘let it go?’…I am probably more stressed about her finances now that I’ve seen… Read more »

Steven@hundredgoals.com
11 years ago

This story sounds as if it could have been written by me. I didn’t accumulate as much debt, but I reached a breaking point where I didn’t know how I was going to make ends meet or afford to do the things that I wanted to do. I found Dave Ramsey’s Total Money Makeover and it too changed my outlook on my relationship with money and debt. Since reading that book I’ve paid off my credit card debt and am now focusing on eliminating my car loan. After that all that is left are my student loans.

Mike C
Mike C
11 years ago

I believe I have always been good with money. Any debt that I did take on like college loans I quickly paid off. I have also been able to keep an emergency fund at 6 months and invest for retirement. Then I got married. The challenge here was to keep “spending” under control. A “budget” just did not work for my wife. I would set the “budget” based on our past spending and our income and ask my wife to help stay within “budget”. It was just to easy to lose control month after month and spend too much. My… Read more »

D.
D.
11 years ago

This is so timely for me because my husband and I finished paying off our credit card debt today! We had both struggled with credit cards since college, but never accumulated more than a couple of thousand dollars of debt each. Once we got married and added up the numbers, it was like a giant kick in the butt. So we did what we always knew we had to do, and now we are cc debt free! We are rewarding ourselves with theater tickets (paid for in cash) 🙂

I’m really looking forward to reading more about the post-debt-repayment stages.

Drew
Drew
11 years ago

Its hard to have money problems when you have no money. But now i have my first [good] job, been at it for the last 1 year. I don’t make much but having to pay for my college keeps my spending lean. However , since i’ll be graduating soon and hopefully getting a good job I hope to use experiences such as yours to chart a sane financial future.
Thank you for your informative blog.

Three One
Three One
11 years ago

JD, I want to thank you for your blog. I am a 30 year old male and have been subscribed to your rss feed for 2 months now. Reading your posts and the readers comments I have managed to reduce my debts, save more, and set savings goals. My fiance and I moved halfway across the country last year so that she could attend grad school. Because I am the only income for the two of us, we have had to rethink how we spend our money. eating out less, using public transportation, and reducing our wine drinking has made… Read more »

Stefe
Stefe
11 years ago

This subject resonates with me due to my current debt snowball. I waited 3 months for Ramsey’s book to come into our library and already had cut back immensly. I just gotta stay on track. It is hard sometimes to keep looking at that number on the wall of what I owe, however I keep chugging along. It just takes time and will power….

Kevin
Kevin
11 years ago

I’m 38 years old and like to think I’ve always been pretty good with money. I was about $30,000 in debt when I graduated from college, but I quickly paid that off. I’ve never carried credit card debt. But my confidence has waned of late. As for my investments, I’ve always kept around 70% in stocks. That’s the standard advice, but now I wonder if I’ve been greedy for “growth”. Obviously my portfolio has taken a big hit in this market. Maybe I should have kept 30% in stocks and just secured the remainder with cd’s and money market accounts.… Read more »

Catboy Steve
Catboy Steve
11 years ago

I’m afraid I didn’t have a wake-up moment, and might have done better if I had. Instead the last few years I went from, “No problem, I could pay off this debt in three months if I really needed to,” to, “in six months if I really needed to,” to now where it will be somewhere between six months and a year. Along the way there were multiple times that could have been a wake up call. From taking the car into the shop and wondering if I would have enough cash or even available credit to pay for the… Read more »

Amy
Amy
11 years ago

I grew up poor. I worked through highschool to help the family make ends meet. I graduated college and got a good job (a well paying job too). I was smart enough to start saving into a 401(k) through work 2 weeks after I started the job. Once that was complete, I start down a road of spending every dollar I earned. Bills, student loan payback, new car, new furniture, new clothes, new stuff, helping out the family (in a most co-dependant fashion). I justified this by thinking “I earn good money, I should be able to afford ______ (fill… Read more »

Cindy
Cindy
11 years ago

I was in the zeroth stage of personal finance from the time I landed my first job in 1988 until I wanted to change jobs in 1999. I bought my first house in 1990 & that’s when things started to get out of control – I wanted to buy things for the house and continue to spend money as I had grown used to. My turning point came when I wanted to change jobs. I found that my financial situation would not allow me the freedom to do that. I had to keep my job with a predictable paycheck. At… Read more »

Shana
Shana
11 years ago

I have cycled through stage 1 and stage 2 for my whole adult life. I was married young and got a decent job right away. My husband and I went through a couple of short cycles of accumulating debt (mostly related to finishing school and building a life) and accumulating savings. In the nearly 11 years we’ve been married we seem to jump between just making it and having several months of income in savings. We have small amounts of non-mortgage debt, but we could use an adjustment in our mind-set. We get to a good place and then begin… Read more »

Meagen
Meagen
11 years ago

Thank you for this very informative post. I would also add Brent Kessel’s book “It’s Not About The Money.” This book greatly helped me recognize the reasons I had accumulated a lot of consumer debt and how to get rid of it.

Robin Layton
Robin Layton
11 years ago

I just finished paying off the last of my credit card debt and I am excited about taking the money I spent on that and putting it into savings. I never made savings a priority and I spent everything. It took a lot of things to make me decide to change and I would pay off debt then immediately reward myself by spending. I think now I might finally have practiced enough to be able to get it right. The problem is that spending is addictive and growing up poor and learning nothing about how to be responsible with money.… Read more »

DTR
DTR
11 years ago

I started my first full-time office job after college in January ’08. I was making more money than I ever had before, and I spent it like crazy. I ate out for lunch every single day. I played $1/$2 No Limit Hold ‘Em every weekend, and some months I would blow through $750 or more on just poker. Thankfully I never accumulated an iota of credit card debt. That was something drilled into me from a very young age; credit cards are poison. I paid my CC bill in full every month. Come June, I went to my first work… Read more »

ali
ali
11 years ago

i graduated in may 2007 with over $90K in student loans. my wake-up call came when i first started working and realized how much of my pay cheque would have to go towards debt repayment. as of today’s date, my debt is down to $60K. i have an aggressive plan for tackling the remaining debt in the next 24 months. i’ve also started an emergency savings account and set up my retirement fund. i can’t wait for the day when my money will truly be my own!

thanks JD for this blog. it serves as a constant source of encouragement.

Liezel James
Liezel James
11 years ago

JD, I too have been following your blog for about 2 months now. I stmbled upon it reading the buying a house versus renting a house post. Since then, I check your blog every so often. My wake-up call came last year just before my divorce of my husband of 10 years. He was very controlling over money matters and although our salaries went into a joint account, he was always in charge – and I let it be so for most of my adult life. He was in charge of every step we took in life, and there were… Read more »

LindaB
LindaB
11 years ago

Kelley,

We haven’t found a way to enlighten those that are in the dark either. My husband and I have been married 23 years and have no debt.

It’s easier for some family members to call us lucky and cheap than to consider we may have some wisdom to share with them. They have the right to their opinion, and as long as they don’t expect us to rescue them from their financial mistakes, I just mind my own business.

You can lead a horse to water, but you can’t make them drink.

LindaB

Allison
Allison
11 years ago

My turning point came in the months after I got married, when my husband and I started combining our finances. I knew my husband had student loans and other debt, but it wasn’t until I added it all up that I realized we were $37,000+ in debt and had no savings or retirement accounts. That’s when I hit the first stage. I read tons of pf blogs (GRS is my favorite!), books including The Total Money Makeover, Your Money or Your Life, and A Random Walk Down Wall Street, and we started paying down our debt. Even still, this second… Read more »

Anelly
Anelly
11 years ago

I cannot give any advice because i need advices. I don’t know how to manage my money, I have debts and i can’t save not even a little bit. It’s really difficult to get to a point.

Nicki at Domestic Cents
Nicki at Domestic Cents
11 years ago

I’m a Total Money Makeover convert too. We’re in the early stages but we’ve definitely turned the corner.

I’m enjoying this series so far. Unpolished posts are refreshing sometimes 🙂 Thanks!

Liz
Liz
11 years ago

Great post JD. I never really had a wake-up call or turning point as I’ve never really been in debt but there was a moment about 9 months ago when I realised that, even though I scraped by each month, managed to save for short term goals easily and had some longer term savings, I didn’t really have control of my own money. Using credit cards (not beyond by means/income) meant I was always playing catch-up. I was spending money about a month before I was actually earning it. This sort of lifestyle is sustainable if you always continue to… Read more »

Amy
Amy
11 years ago

I really appreciated your article. My husband and I are slowly paying off our debt. We just refinanced to a 5.5% 30 year fixed which frees up about $150 a month in payments that we can use towards other debt. And, I’ve been throwing any extra money towards paying off my car and I’m just 1 payment away…which will then free up an extra $300 a month that we can put towards debt. I love Dave Ramsey’s plan to pay off the smallest debt and then use that money to put towards the next smallest. I’m starting to get a… Read more »

HollyP
HollyP
11 years ago

I’ve made some stupid financial mistakes, but thankfully nothing with terrible consequences. It’s a learning process. It isn’t always possible to get through to family. I am thankful for this aspect of the current financial mess: my BIL was laid off, and my husband finally agreed to set up a savings account for family bailouts. (He feels great responsibility for his family, and we are often asked to help out. ) Prior to this, he felt that budgeting that help was planning for his family’s failure. Now he’s come around to see it is just good sense to be prepared.… Read more »

HaideeL
HaideeL
11 years ago

I just started reading your blog, and it’s very interesting. We really need to create a livable budget — I’ve never figured out how to do this properly, which means we can never follow it because it’s unrealistic. We have more debt that I want to admit to, and it stresses me out all the time. We have a dog, some fish, and two children small enough to need childcare, and the childcare alone is enough to put you over the edge. I’m ordering The Total Money Makeover from my library — but can it *really* help us get out… Read more »

Steve @ Freedom Education
Steve @ Freedom Education
11 years ago

Hey JD. This is in response to your comment above: “I think many of us would like to know how you approached the conversation with your friend. Did he ask you for advice? Did you offer it? How did this work? Did you actually use receipts? Or did you just ask him to estimate his spending?” When I began to share the results my wife and I were getting with our new money management system and how we were able to afford to do the things we want and still pay our bills, he got interested. He said to me,… Read more »

Daniel
Daniel
11 years ago

I often feel I’ve lucked into my money situation. I’m not rich by any stretch, but managed to stay debt free except for a house and have never had a credit card (I’m 30 now). I read Dave in college and practice some of that now (emergency fund, living ‘below means’, etc), but still feel like I’m not investing and saving quite right.

So, no epiphany or wonderful testimony, just doing what works =)

New Beginning
New Beginning
11 years ago

What would you do? I am in a similar boat as JD was a long time ago, here is a question that is haunting me now. I am a first time home buyer who is getting the $8000 credit from the recent stimulus. Should I use that to pay off on my credit card (3.99 apr) or should I put that into my mortgage (5.625 apr) principal that will partially eliminate the PMI I am paying? I got into this predicament after I started reading GRS regularly and realized what I got myself into by buying the house, although it… Read more »

Corporate Barbarian
Corporate Barbarian
11 years ago

JD,
This is my first comment, but I’ve enjoyed reading your blog for the last year or so. The epiphany came after a casual conversation about college costs for my oldest son. It was like a bucket of ice water was dumped on my head. Soon after, my wife and I started paying down our debt by throwing every extra dollar at our credit card balances. It’s a great feeling when your credit card balance is zero.

Holly
Holly
11 years ago

J.D., thanks as always for a great post. My first “candle in the dark” moment came when I read Your Money or Your Life. But I still couldn’t seem to get a grip until I found the budgeting program You Need a Budget (YNAB). That whole thing about giving every dollar a job to do (BEFORE you spend it!) really helps. Now I just started it less than a year ago, and I must admit that I messed up at Christmastime as I realized I had not saved enough for gifts. So I overspent that category, but like you said,… Read more »

Debbie M
Debbie M
11 years ago

@New beginnings — you might want to put your stimulus check in a safe savings account so that if something comes up you can use that make sure you can keep paying your mortgage. If you apply this to the mortgage early, a payment will still come due every month. Paying down your credit card also won’t help, though paying off your credit card could free up money to go into savings. But then many people find that if they use a windfall to pay off a credit card, they charge it back up right away whereas if they find… Read more »

RM
RM
11 years ago

“I felt sick” .. is the perfect description and I love the fact you said it. It is usually in that moment of realization that we gain the most clarity on how screwed we are and how the $5 latte has gotten us no where and that there are are very few “Bill Gates” and a whole lot of “John/Jane Doe”.

It does take time to recover, but fear/sickness should not stop us….. and we will stumble (I still get a $5 latte every once in a while)

Brent
Brent
11 years ago

For me it was my first overdraft. I had always been a saver, but at one point it hit me that I could actually run out. This was in college shortly before getting a job. Since then I continue to fight the cursed lifestyle inflation. I’m 24. I rent a small one bedroom but am thinking of buying a house this year due to the depressed market and stimulus bonuses. I keep going, that could be nice, and then have to re-center myself remembering that I’m simply replacing not trading up. And of course the lenders, the agents, and the… Read more »

Marie
Marie
11 years ago

Hi JD, first I want to say that I’ve been reading your blog for a few months now and it’s been a great inspiration. The moment of truth for me came when my boyfriend offered to pay off my credit card debt because it bothered him that I was getting reamed by interest payments he felt were unnecessary. I really balked at this concept because I hate being reliant on someone, so to assert my independence I determined to pay off all of my credit card debt in three months time. It was aggressive and I really had to pinch… Read more »

Faculties
Faculties
11 years ago

This is an excellent post and an excellent blog, JD. I just wanted to say that “payed” is spelled “paid.” I hope you don’t mind — every other aspect of your blog has so much real-life credibility that I didn’t want one thing to distract.

J.D.
J.D.
11 years ago

No problem, Faculties! I welcome typo corrections. (Or spell-o corrections, as in this case.) I’ve actually had something of a lapse lately; my spelling has been atrocious. I’ve been a good speller since third grade, so I’m not sure why that skill is going now, but it is. Homonyms, especially, are giving me trouble.

Loc
Loc
11 years ago

JD, just want to say I love your blog and have been reading for about a year now. Like some of the posters above me, I had money issues. However, mine are just the opposite of most people – I’m terrified to spend money. When I graduated in 2000, it took me 11 months to find my 1st ‘real’ job. I worked various jobs just to make ends meet until I got a job in my chosen field. After working for about 6 months, I was layed off. Nothing related to performance, strictly financial decision of the company. I was… Read more »

Michele
Michele
11 years ago

I am the opposite of most people commenting on here. I have always been a saver and I have to attribute it to my parents. My dad was always responsible with money – living on 2/3 of what he earned and saving 1/3. He is a high school graduate and grew up poor. Yet, he put all three of his children through college and bought each a car at graduation. They are now retired with two homes. I either inherited his gene or learned from him because I have never been in debt and have been saving for retirement since… Read more »

Maureen
Maureen
11 years ago

I’m similar to Michele. I grew up with this image of my dad being sad whenever bills came in. He has never been in debt and bought our house outright after saving for it in Japan and moving to England. He’s always made it clear that savings are not to be touched (although he never named it such it was our emergency fund). I have to thank him for my ability to save. A lot of mine and my sisters’ childhood was focussed on success in extra curricular activities and we rarely went shopping. He’d usually do it alone or… Read more »

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