October 22, 2024 • 25 mins
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Becoming debt-free isn’t just about crunching numbers—it’s about building a system that sustains your motivation and sense of accomplishment. Whether you’re just starting out or already making strides on your debt journey, the Debt Snowball Method helps you stay focused on the small wins that lead to big results.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Brad (00:00):
Hey, so are you feeling buried under credit card debt
with no end in sight?
With debt at an all-time highand missed payments piling up,
it's easy to feel like you'llnever break free.
But what if there was a simplestrategy that didn't just help
you pay off your debt, but alsogave you quick wins to keep you
motivated along the way?
In this episode, we're gonna bediving into a powerful method
(00:22):
that uses psychology to help youcrush your debt for good.
One small win at a time, and ifyou're curious how it works,
tune into this episode and we'regoing to share.
Announcer (00:35):
You're listening to the debt free dad podcast with
Brad Nelson.
Brad and his co hostsexperience the anxiety of living
paycheck to paycheck beforelearning the fundamentals of
financial success.
They are now on a mission toempower regular people to pay
off their debt for good andenjoy happier, less stressful
lives.
Keep listening forinspirational interviews, tips,
(00:56):
tricks and practical advice togain financial freedom.
Brad (01:06):
Hey guys, I'm Brett Nelson , founder of Debt Free Dad.
I paid off about $45,000 ofdebt, have been debt free now
for more than 11 years, outsideof my mortgage.
We've also been fortunate tohelp thousands of other people
save and pay off tens ofmillions of dollars with the
work that we do here at DebtFree Dad.
Amber (01:21):
And I'm Amber Taylor, and we paid off and saved $54,000
in 20 months and have beenliving debt free outside of our
mortgage since 2018.
Chris (01:30):
And I am Chris Hawkins, and my wife and I started our
journey way back in 2005.
And from 2005 to 2008, we paidoff just under $100,000 of debt
and have been debt free eversince.
Ryan (01:43):
And my name is Ryan.
My wife and I paid off $160,000in debt while we were raising
three kids.
Brad (01:49):
Now, guys, after listening to this episode, if you want to
take your finances a stepfurther, you'd like to get
better results and start seeingthese results in as little as 30
to 60 days.
I'll be sharing some detailsabout how you can get started
with that later on in today'sshow.
So, guys, in today'sconversation, we're going to be
revealing this really powerfultool.
We have brought it up severaltimes here on the podcast, but
(02:10):
we really wanted to dive in andjust focus on it for you guys
who are looking for a way to getstarted.
But before we do that, I wantto just read some quick
statistics from a recent articleabout credit card debt from
Experiancom, and the article istitled Credit Card Debt Hits a
New High, with DelinquenciesRising.
It says American consumers carrya combined nearly $1.2 trillion
(02:34):
in credit card debt, accordingto a quarter to 2024 data from
the Federal Reserve Bank of NewYork.
That's a new record high and anincrease of $111 billion from
just a year ago, which is an 11%increase.
In contrast, consumer spendingincreased by just 5.2%,
(02:56):
according to the Federal ReserveBank of St Louis, indicating
that recent high interest ratesare a significant driver of
ballooning balances.
As debt numbers have increased,so have delinquencies.
The bank reported that 9.1% ofcredit card balances have
transitioned into delinquencyover the past year, meaning that
borrowers have missed at leastone payment by 30 days or more.
(03:19):
What's more, 7.18% of balancesare behind by at least 90 days,
a 41% increase from just a yearago.
I'm not shocked by thesenumbers.
I think we're going to talkabout this tool, but any
feedback on that Does itsurprise you?
(03:39):
Do we blame inflation on that,or where do you think these
delinquencies are happening?
Chris (03:44):
I think they've always been happening.
Maybe inflation's made itslightly worse, but we have
traditionally seen you mentionedcredit card debt.
It's gone up almost every year,with exception of maybe two
years there during COVID, and sothis is to me an ongoing
epidemic of using debt tofinance your lifestyle.
So I think it's not shockingand it's only going to continue
(04:06):
to go up over time.
Ryan (04:08):
Yeah, I mean, do I think inflation plays a part in that?
I mean, sure, I mean I will saythat inflation plays a part in
these numbers.
The reality, though, for me andI've seen this in my own debt
journey is the reason for it isbecause we weren't preparing for
this before it happened.
If inflation and all thesethings happen the rising costs
(04:31):
of everything were happening theway that it is now, when I was
in debt, I would be part ofthose statistics.
My credit card debt would berising because that was the only
way I could have paid forthings.
That's the way I was financingmy lifestyle.
I wasn't preparing forsomething that bad was going to
happen like that.
So does it contribute?
Yes, is it the reason?
(04:52):
And I think that's where Ithink a lot of us get confused,
or a lot of people get like topoint the finger and say that's
the reason that I have to use mycredit card.
And the real reason you have touse your credit card is most
likely because you weren't agood saver and you weren't doing
the right things before allthis happened, and now you're
having to just rely on it morethan what you've been used to.
Brad (05:11):
Yeah Well, today, guys, we're going to be sharing this
tool and I think it's unanimoushere on this show.
This is probably, I think, allof our favorite tools.
But can you guys share beforewe talk about the one we like?
Were there a couple ofdifferent ways you tried prior
to using this method that we'regoing to talk about here today?
Like I know, for me, I triedthe whole consolidation thing,
(05:34):
tried even doing like a HELOC,taking money out of my home that
I owned at the time and payingoff debt that way which really
wasn't really paying it off.
It was just moving it aroundcredit card balance transfers
and things like that, orsometimes you'd pay a little bit
more on each account trying topay them off that way.
But none of that really seemedto kind of work for me.
Amber (05:53):
Yeah, we did the consolidation.
We pulled it all together, puta car in there, put our credit
cards in there, and I was like,hey, that's it, the credit cards
are at zero, we're not touchingit anymore.
Well, the credit cards rackedback up to max.
Brad (06:06):
Until you did.
Amber (06:08):
It did not work.
Chris (06:10):
In terms of consolidation .
We tried that as well, andfound ourselves with more debt
after we consolidated for theexact same reason.
So when we talk about this onthe show, we've been there, done
that, and so we're telling youfirsthand if you try to
consolidate your debt as a meansof making things feel better,
being able to get the monkey outof your back not going to
happen.
Amber (06:30):
Well, it felt good for a minute.
Chris (06:33):
A minute okay.
Ryan (06:36):
And I would.
The only thing I'd add to thatis we're not I would say I'm not
, at least I'm not 100% againstconsolidation.
But you have got to, like, fixall of your behaviors and fix
the reason why that doesn't work.
Because we were same thing weconsolidated so many times.
It never worked.
But once we fixed our brokenways of handling money, there
(06:58):
was a point where we didconsolidate and it worked great.
But you have to get to thatpoint and we were never to that
point.
It was like what, amber?
It was just that quick fix,that feeling of, oh, it feels so
good, and then boom, you'reright back to spending in a
short amount of time.
Chris (07:11):
Can I play devil's advocate here?
Yeah, I agree 100%.
Get to the point where you canmanage your money, get to the
point where you know what'scoming in, what's going out,
that you have a game plan.
But by the time you executethat enough that consolidation
becomes an option, I would argueheck.
(07:34):
You're close enough to justfinishing as it is, and so as a
devil, because a devil'sadvocate here I'm not sure that
consolidation would have, formost people would speed things
up.
That much is my point.
Brad (07:41):
Yep, so let's talk about the method that we all love and
the method that we think isprobably the most successful in
getting out of debt, and it'scalled the debt snowball method.
So, um, in your guys's opinionnow I use this.
Obviously this is what we, youknow, teach.
This is what we share.
It's been around for a longtime, but what are some of your
(08:03):
guys's favorite parts about thesnowball?
Chris (08:07):
There's a specific purpose behind putting the
lowest balance first.
I've been there, tried theother method and it doesn't work
.
And for anybody to call youstupid for trying it this way or
they just don't know whatthey're talking about themselves
you've got to work your plan,you've got to execute what your
goals are, and I believe deepdown that the method of the debt
(08:29):
snowball that we're going toshare here is going to work
better than any other version.
Brad (08:34):
Well, I think that's where people argue.
It is that the math doesn't lie, because it doesn't.
I mean, if you look at theavalanche method, could it
potentially save you more ininterest if you did it that way?
Yeah, mathematically probably,but not every time it depends.
But I think you might find thatyou'll be coming out more, even
as it is, because I think whatmost people do with the
(08:56):
avalanche at least I did,because I tried that method too
where you're like okay, I'mgoing to attack the highest
interest credit card.
Well, my highest interestcredit card, one of my biggest
credit card bills, was $8,000 or$9,000.
And it's like it would take meso long.
Chris (09:09):
What happened is you just burn out and you quit and so I
think that's where themotivation it basically just
ends in a lot of cases, andthat's why I think people get
burned out with that avalanche.
So, mathematically, in aperfect world, yes, you would
pay less interest over time, butif you don't finish and you
stay in debt for the rest ofyour life, you're going to pay a
(09:29):
whole lot more in interest.
Yeah, exactly.
Brad (09:32):
And that's the part that they miss.
It's like, but you're lookingat it in perfect world, Perfect
world people don't follow itperfectly.
Chris (09:40):
Well, life doesn't go 100% perfect according to plan.
If it did, you probablywouldn't be in debt.
I wouldn't have been in debt,none of us would have been in
debt.
We wouldn't be here talkingabout this.
Brad (09:50):
Yeah, yeah, totally agree.
So share real quick what aresome of your guys' favorite
parts about it?
Obviously, Chris, you kind ofalluded to the psychology behind
it.
I think for me it's just it'sgetting those quick and easy
wins.
And by focusing on that, youknow, on the debt snowball,
where you list your debts, debts, and we're going to kind of go
through this step-by-step guysfrom here in just a minute.
But you basically you knowwe'll list your debts smallest
to largest, by balance owed,instead of interest rates, and I
(10:11):
think for me it was like payingoff that smallest debt first.
That felt great, Like I wasn'tmaking any progress at all in
getting out of debt, savingmoney.
But when I finally built thatfirst emergency fund and then
was able to pay down a debt,it's like we actually can do
this and I think that was a gamechanger for me.
It actually made it seempossible.
Chris (10:33):
So you talk about the quick win.
Yeah, I would imagine everybodyout there listening who has
debts.
You probably have one debt thatthe balance is so small that if
you really put your mind andtime and effort to it, you could
probably pay that off within amonth, two months at most.
All right, Everybody's got oneof those debts.
It's so low balance-wise thatyou can accomplish that, and
(10:57):
maybe that's your only goal.
And that's the thing I likeabout the debt snowball, as it's
described here, is that quick,easy victory.
Like you mentioned, You've allgot one.
All right.
When you gain that confidencelike anything else in life, that
light bulb moment, it helps yourealize I can do this and it
helps you realize that, hey,that next debt, which probably
(11:19):
doesn't have that much more of abalance than the first one, is
certainly achievable.
And at the end of the day, ifyou pay off that first debt this
is what I like about this youat least have paid something off
, as opposed to the other method.
If it's the highest balancethat you have, you may not ever
get it paid off.
Amber (11:37):
Well, if you're anything like me, not being in control of
something is very hard for me.
Paying that first one just gaveme that sense of control back,
like, oh my gosh, I got this, Ican do this, and then paying off
the next one and the next one,like at some point in this dead
snowball.
I was almost gamifying it atthat point because I'm like I
(11:59):
could do this and it just gaveme that sense of control back,
which I mean.
The wins were great, I wascelebrating, it was awesome.
Ryan (12:09):
But that control man, wow, that was big.
Well, I think I mean, for us itwas just we were diluting our
efforts so much and I thinkthat's the snowball for us
(12:33):
no-transcript, not going to dothat on five of them and we're
going to put all that, even ifit was like a lot of times when
we were paying extra.
We're not talking like tonsextra, it was like 25 or 30
bucks a month.
Well, if you have five or sixbills that you're doing that
with, I mean that's $180, $150,$180 that you can put towards
(12:54):
that smallest bill.
And it's like when we started,when we rewired and started
doing that, it was like whoa,kind of like you, amber.
It was like, oh, like I havemore money than I think, because
I weren't even thinking aboutit.
We were just thinking we'remaking progress on all of them
and when we just focused on oneman, we really could make some
progress.
Chris (13:14):
And so, amber, you mentioned the word gamify, and
that's exactly what I did.
I looked at my next debt andsaid, okay, it's $500, enough to
pay it off, and every dollar isa point.
How do I come up with 500points?
And I treated that debt like itwas one game in a season and
all of my debts were a wholeseason, and so I had to get
through one game to be able toget to the next game.
(13:35):
Okay, that's one way that Igameified it.
The other one was I looked atthe total amount and said, okay,
it's 90, it was like 95,000roughly.
I don't have to come up with$95,000.
I have to come out with $100,950 times and seem much more
manageable that way to gamify it.
So I love that word, amber.
Brad (13:56):
Well, I think gamifying it also creates the momentum or it
creates that confidence that wedon't have Any sort of action
like Ryan you said you pay offsmall debt or you focused on a
small debt Any sort of actioncreates results and those
results create confidence andobviously the more results that
you get, the more confidence youget, the more momentum you get.
And I think that's really thereal secret sauce behind this
(14:19):
snowball.
And we've had so many memberswho have done this where they
say, like Amber, you saidgamified or it almost becomes
like addicting you know, likeI'm getting so addicted it's
becoming almost fun and peoplesay that like fun to pay off
debt because they start to feelthat confidence, that momentum.
Who knew the word fun would be?
Amber (14:36):
associated with paying off debt.
Chris (14:38):
That's exactly how I felt .
Ok, you can add me to that list.
There came a point in which, OK, listen, how can I come up with
more money to pay this nextdebt off?
And every decision, everydecision about how to spend
money came down to is it worthspending money for that or worth
buying points in this game?
That's sort of how I looked atit, and the further I got into
(15:01):
it, the more competitive Ibecame with myself.
And it was fun.
It was a lot of fun once it gotgoing All right, guys.
Brad (15:09):
So let's talk about how we set this up.
So we're just going to kind ofgo step by step.
So first you just can take anypiece of paper.
In fact, we give out our DebtSnowball Worksheet in our Life
Without Payments Workshop.
So if you want to go on ourwebsite, go under tools on the
website.
You'll see the Life WithoutPayments Workshop there.
We have the worksheet there.
It has the instructions in it.
So if you want that, sign upfor the workshop.
You're also going to get agreat workshop with it too.
(15:31):
But also you get this DebtSnowball Worksheet to kind of do
this work that we're talkingabout.
Want to list all of your debts,so write out all of them.
And this is probably maybe themost overwhelming part of the
whole process is really tallyingup how much total debt that you
have.
And you guys, can you guys talkabout when you guys did this
for the first time?
I remember when I did it forthe first time it was like, okay
(15:54):
, it's as bad as I thought itwas and it feels really crappy.
Amber (15:59):
It just makes it real.
It made it real for us, yeah.
Chris (16:02):
For me, it was more about I knew how much we owed.
That wasn't necessarily asurprise.
When it came to budgeting andgoing back and looking at where
we spent money and how we werespending money, that was the
punching, the gut.
Ryan (16:18):
Yeah, and I would just say this was an exercise that is
easy to pretend is not as bad asit is.
What I mean by that is likeit's easy to just kind of sit
down quickly and be like, ohyeah, oh yeah, and I owe this
and that's what I owe, but thenyou're really not taking into
account, like oh, I owe money onmy car, oh, I owe money on that
other car, oh, I owe money onyou.
(16:45):
Don't really you're not reallyprocessing it.
So, like for me, like when wesay, list all your debts, like
really take your time and gothrough everything, the feeling
sucks.
I don't think we've ever foundanybody that was like, oh, I did
it and I feel so great.
I mean, everybody, I think,feels just absolutely terrible
and it's a gut punch.
But it's also the first stepand like what Amber said earlier
, of like taking control.
If you do this kind of, youknow you don't take it seriously
and you kind of do it.
(17:06):
It's because we did that acouple of times.
We just kind of tried to avoidbecause we didn't really want to
see the whole number.
We wanted to see the stuff Iwas willing to take
responsibility for, but I didn'twant to see the rest of it, so
you got to really sit down andwrite down, so you have the
exact amount that you owe oneverything.
Chris (17:22):
I want to point out here because I've heard this question
a lot of times from people.
You say list all of your debts.
Well, I think, if I'm correcthere, what we're meaning by that
is every debt car, student loan, credit card, et cetera with
the exception of a mortgage ifyou have one.
Is that correct?
Correct, yeah.
Amber (17:40):
Okay, and include personal loans too.
Just because you're not owinginterest to your mom, it still
counts, yeah.
Brad (17:46):
Yes, everything.
Yeah, make sure you listeverything.
And then make sure, when youlist that debt, obviously you
want to make sure you understandwhat all the minimum payments
are for those debts, becauseyou're going to list that along
with it.
And then what the point of thedebt snowball is is then you're
going to make all of yourpayments, all the minimum
payments, except for that firstsmallest there, and it feels
really good to get that firstdebt paid off.
(18:07):
In fact, I think when I firststarted, I think I paid off the
first two or three debts withinthe first two months, and paying
(18:29):
off three accounts was awesometo be able to check that stuff
off.
Chris (18:33):
Yeah, and there's less on your snowball at that point
Right.
The more you pay off your debts, the easier, to some degree,
the rewriting or the managing ofthe debt snowball becomes.
Brad (18:44):
Yeah, so once you pay off that first small debt, then
you're going to essentially takethat minimum payment from the
first debt and roll it into thesecond debt on your list.
So let's say, for instance, tomake math easy, your first debt
had a minimum payment of $25.
Your second debt has a minimumpayment of $25.
Well, being that you alreadypaid off the first one, you're
(19:05):
going to take that $25.
You normally would have beenpaying on the first one.
You're going to roll that intothe second one, paying now $50.
But the key to the debtsnowball and making it work
faster is also having a reallygood budget and taking any extra
money that you have and puteven more on top of that $50
(19:25):
payment.
So you're paying it down andyou're increasing the speed of
how fast you're paying down someof these debts by focusing on
just that next debt while makingthe minimum payments on the
others.
Ryan (19:34):
Yeah, and really, where you'll start seeing the
compounding differences in thisis typically your bigger debts.
Like you start small to gainmomentum and to gain like, okay,
I can do this, it makes youwant to do the next one.
But typically, as the as youget to your next debts, they're
usually higher minimum payments.
They're usually a hundreddollars, $200, $300.
(19:55):
Well, once you pay that off,now you're not rolling $25 over,
you're rolling two or 300 intothat next debt, and so you pay
that off.
Now you're not rolling $25 over, you're rolling $200 or $300
into that next debt, and so youpay that one off and now you're
rolling, okay, that $200 or $300.
Maybe your next debt was also$200 or $300.
Now, when that one's paid off,you're rolling potentially $500
to $600 into the next debt.
So the more you do this, itjust compounds on itself and it
(20:16):
makes it go that much faster,right.
Brad (20:20):
Well, and I think it also gives you.
You know, a lot of peoplealways have the question of Brad
, I got a sum of money maybe itwas a tax return or inheritance
or a bonus at work and they'realways like, well, what should I
do with that money?
Well, if you're working theplan that we talk about here,
you already know the answer.
You're going to take that lumpsum of money and you're going to
focus on your smallest debtthat you're working on.
(20:40):
And I think that's the coolpart about this is that when you
get these extra, you knowbecause we all see that, whether
it's, like I said, a tax returnor a bonus or something like
that, comes into our hands, youcan now take that money and make
tremendous headway in payingdown debt because you have a
plan that you're working on, asopposed to you know, when I used
to get windfalls, no, I wasn'tpaying off any debt, I was
(21:01):
spending it right.
But when you get motivated, youwant to just pile more and more
on that debt.
Amber (21:06):
It's funny how your mindset shifts as soon as you
start doing this, and then thebehavior changes and you're
focused on it, and when awindfall comes like that, you're
like yeah, no, I don't need thetoy that I was thinking about,
I want to pay this off need thetoy that I was thinking about.
Chris (21:21):
I want to pay this off.
Yeah, it's like I can knockfour out of seven debts off the
list.
Wow, that's over 50% of it, atleast visually.
I want to point out one otherthing here, and I'm not sure
where this goes in the list, butfor many folks, when you do
your debt snowball, there isprobably going to be one, two,
three car payments in theresomewhere, and car payments are
(21:44):
designed from the very beginningto have a set payoff date.
You make X number of payments, xamount of dollars for X number
of months and it's paid off, andmany times at least my
experience is the car paymentsare going to be some of the ones
lower on the list, is the carpayments are going to be some of
the ones lower on the list.
And so while you're making thatminimum or required payment on
that car loan, you are graduallypaying that balance off.
(22:07):
And so when you get to thatpoint where maybe the car loans
are the last couple of thingsleft on the list, you don't have
as much to pay off as youperhaps thought you would when
you get there, because thebalance has reduced itself, and
when you get to that point,you're probably going to find
that you can pay that off muchfaster than you originally
thought.
Brad (22:27):
All right, guys.
So the debt snowball methodisn't just about the numbers.
It's about creating a systemthat helps you stay motivated
and empowered on your journey tobecoming debt free.
And by focusing on just thesmall, quick wins, you'll build
momentum and confidence, whichare the key to sticking to this
for the long-term plan.
So, guys, as we mentioned, ifyou want to pay off debt, if you
(22:48):
want to save more money, if youwant to take better control of
your finances and start seeingsome amazing results and
seriously, guys, just as littleas 30 to 60 days all you have to
do is head over toDebtFreeDadcom, click on the
green button at the top of thepage and I'm going to show you
how you can get started.
Let's talk about death.
Announcer (23:05):
Let's talk about death Turn into a death-free.
Chris (23:08):
death Turn into a death-free death.
Amber (23:28):
And that's how it means it's time for the celebrations
of the show.
First we have Linda.
She says yay, I paid down$5,000 on my snowball plan
working on Down the Mountain,yeah that is awesome.
Brad (23:40):
I love that Down the Mountain.
That's right.
$5,000 is a huge chunk ofchange.
Congratulations, janine.
I was able to pay $1,300 off indebt and I saved $650 towards
my emergency fund.
Janine, congratulations, thoseare great wins.
Chris (23:56):
And Tara says that her September budget is completed
and now she's going to start herdebt snowball to pay down some
debt and she's working with herhusband to reach their goals.
Brad (24:08):
That's awesome Way to go, Tara.
Ryan (24:10):
And Nicolette.
I paid off my third credit carddebt by using the debt snowball
method and I have four morecredit cards to go.
Brad (24:16):
Awesome Way to go, nicolette, as always.
Guys, congratulations to all ofyou guys who are taking a stand
for your financial life and arewanting better.
Hey, we get that getting out ofdebt isn't easy, but with our
help and hopefully with yourconsistency and discipline, we
promise you guys this will besome of the best work that you
guys do in your entire life.
Thanks for joining us ontoday's show and we will see you
guys on the next episode.
(24:37):
You guys on the next episode.
Announcer (24:43):
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visit debtfreedadcom.
(25:03):
Catch you next week.
Hey, so are you feeling buried under credit card debt
with no end in sight?
With debt at an all-time highand missed payments piling up,
it's easy to feel like you'llnever break free.
But what if there was a simplestrategy that didn't just help
you pay off your debt, but alsogave you quick wins to keep you
motivated along the way?
In this episode, we're gonna bediving into a powerful method
(00:22):
that uses psychology to help youcrush your debt for good.
One small win at a time, and ifyou're curious how it works,
tune into this episode and we'regoing to share.
Announcer (00:35):
You're listening to the debt free dad podcast with
Brad Nelson.
Brad and his co hostsexperience the anxiety of living
paycheck to paycheck beforelearning the fundamentals of
financial success.
They are now on a mission toempower regular people to pay
off their debt for good andenjoy happier, less stressful
lives.
Keep listening forinspirational interviews, tips,
(00:56):
tricks and practical advice togain financial freedom.
Brad (01:06):
Hey guys, I'm Brett Nelson , founder of Debt Free Dad.
I paid off about $45,000 ofdebt, have been debt free now
for more than 11 years, outsideof my mortgage.
We've also been fortunate tohelp thousands of other people
save and pay off tens ofmillions of dollars with the
work that we do here at DebtFree Dad.
Amber (01:21):
And I'm Amber Taylor, and we paid off and saved $54,000
in 20 months and have beenliving debt free outside of our
mortgage since 2018.
Chris (01:30):
And I am Chris Hawkins, and my wife and I started our
journey way back in 2005.
And from 2005 to 2008, we paidoff just under $100,000 of debt
and have been debt free eversince.
Ryan (01:43):
And my name is Ryan.
My wife and I paid off $160,000in debt while we were raising
three kids.
Brad (01:49):
Now, guys, after listening to this episode, if you want to
take your finances a stepfurther, you'd like to get
better results and start seeingthese results in as little as 30
to 60 days.
I'll be sharing some detailsabout how you can get started
with that later on in today'sshow.
So, guys, in today'sconversation, we're going to be
revealing this really powerfultool.
We have brought it up severaltimes here on the podcast, but
(02:10):
we really wanted to dive in andjust focus on it for you guys
who are looking for a way to getstarted.
But before we do that, I wantto just read some quick
statistics from a recent articleabout credit card debt from
Experiancom, and the article istitled Credit Card Debt Hits a
New High, with DelinquenciesRising.
It says American consumers carrya combined nearly $1.2 trillion
(02:34):
in credit card debt, accordingto a quarter to 2024 data from
the Federal Reserve Bank of NewYork.
That's a new record high and anincrease of $111 billion from
just a year ago, which is an 11%increase.
In contrast, consumer spendingincreased by just 5.2%,
(02:56):
according to the Federal ReserveBank of St Louis, indicating
that recent high interest ratesare a significant driver of
ballooning balances.
As debt numbers have increased,so have delinquencies.
The bank reported that 9.1% ofcredit card balances have
transitioned into delinquencyover the past year, meaning that
borrowers have missed at leastone payment by 30 days or more.
(03:19):
What's more, 7.18% of balancesare behind by at least 90 days,
a 41% increase from just a yearago.
I'm not shocked by thesenumbers.
I think we're going to talkabout this tool, but any
feedback on that Does itsurprise you?
(03:39):
Do we blame inflation on that,or where do you think these
delinquencies are happening?
Chris (03:44):
I think they've always been happening.
Maybe inflation's made itslightly worse, but we have
traditionally seen you mentionedcredit card debt.
It's gone up almost every year,with exception of maybe two
years there during COVID, and sothis is to me an ongoing
epidemic of using debt tofinance your lifestyle.
So I think it's not shockingand it's only going to continue
(04:06):
to go up over time.
Ryan (04:08):
Yeah, I mean, do I think inflation plays a part in that?
I mean, sure, I mean I will saythat inflation plays a part in
these numbers.
The reality, though, for me andI've seen this in my own debt
journey is the reason for it isbecause we weren't preparing for
this before it happened.
If inflation and all thesethings happen the rising costs
(04:31):
of everything were happening theway that it is now, when I was
in debt, I would be part ofthose statistics.
My credit card debt would berising because that was the only
way I could have paid forthings.
That's the way I was financingmy lifestyle.
I wasn't preparing forsomething that bad was going to
happen like that.
So does it contribute?
Yes, is it the reason?
(04:52):
And I think that's where Ithink a lot of us get confused,
or a lot of people get like topoint the finger and say that's
the reason that I have to use mycredit card.
And the real reason you have touse your credit card is most
likely because you weren't agood saver and you weren't doing
the right things before allthis happened, and now you're
having to just rely on it morethan what you've been used to.
Brad (05:11):
Yeah Well, today, guys, we're going to be sharing this
tool and I think it's unanimoushere on this show.
This is probably, I think, allof our favorite tools.
But can you guys share beforewe talk about the one we like?
Were there a couple ofdifferent ways you tried prior
to using this method that we'regoing to talk about here today?
Like I know, for me, I triedthe whole consolidation thing,
(05:34):
tried even doing like a HELOC,taking money out of my home that
I owned at the time and payingoff debt that way which really
wasn't really paying it off.
It was just moving it aroundcredit card balance transfers
and things like that, orsometimes you'd pay a little bit
more on each account trying topay them off that way.
But none of that really seemedto kind of work for me.
Amber (05:53):
Yeah, we did the consolidation.
We pulled it all together, puta car in there, put our credit
cards in there, and I was like,hey, that's it, the credit cards
are at zero, we're not touchingit anymore.
Well, the credit cards rackedback up to max.
Brad (06:06):
Until you did.
Amber (06:08):
It did not work.
Chris (06:10):
In terms of consolidation .
We tried that as well, andfound ourselves with more debt
after we consolidated for theexact same reason.
So when we talk about this onthe show, we've been there, done
that, and so we're telling youfirsthand if you try to
consolidate your debt as a meansof making things feel better,
being able to get the monkey outof your back not going to
happen.
Amber (06:30):
Well, it felt good for a minute.
Chris (06:33):
A minute okay.
Ryan (06:36):
And I would.
The only thing I'd add to thatis we're not I would say I'm not
, at least I'm not 100% againstconsolidation.
But you have got to, like, fixall of your behaviors and fix
the reason why that doesn't work.
Because we were same thing weconsolidated so many times.
It never worked.
But once we fixed our brokenways of handling money, there
(06:58):
was a point where we didconsolidate and it worked great.
But you have to get to thatpoint and we were never to that
point.
It was like what, amber?
It was just that quick fix,that feeling of, oh, it feels so
good, and then boom, you'reright back to spending in a
short amount of time.
Chris (07:11):
Can I play devil's advocate here?
Yeah, I agree 100%.
Get to the point where you canmanage your money, get to the
point where you know what'scoming in, what's going out,
that you have a game plan.
But by the time you executethat enough that consolidation
becomes an option, I would argueheck.
(07:34):
You're close enough to justfinishing as it is, and so as a
devil, because a devil'sadvocate here I'm not sure that
consolidation would have, formost people would speed things
up.
That much is my point.
Brad (07:41):
Yep, so let's talk about the method that we all love and
the method that we think isprobably the most successful in
getting out of debt, and it'scalled the debt snowball method.
So, um, in your guys's opinionnow I use this.
Obviously this is what we, youknow, teach.
This is what we share.
It's been around for a longtime, but what are some of your
(08:03):
guys's favorite parts about thesnowball?
Chris (08:07):
There's a specific purpose behind putting the
lowest balance first.
I've been there, tried theother method and it doesn't work
.
And for anybody to call youstupid for trying it this way or
they just don't know whatthey're talking about themselves
you've got to work your plan,you've got to execute what your
goals are, and I believe deepdown that the method of the debt
(08:29):
snowball that we're going toshare here is going to work
better than any other version.
Brad (08:34):
Well, I think that's where people argue.
It is that the math doesn't lie, because it doesn't.
I mean, if you look at theavalanche method, could it
potentially save you more ininterest if you did it that way?
Yeah, mathematically probably,but not every time it depends.
But I think you might find thatyou'll be coming out more, even
as it is, because I think whatmost people do with the
(08:56):
avalanche at least I did,because I tried that method too
where you're like okay, I'mgoing to attack the highest
interest credit card.
Well, my highest interestcredit card, one of my biggest
credit card bills, was $8,000 or$9,000.
And it's like it would take meso long.
Chris (09:09):
What happened is you just burn out and you quit and so I
think that's where themotivation it basically just
ends in a lot of cases, andthat's why I think people get
burned out with that avalanche.
So, mathematically, in aperfect world, yes, you would
pay less interest over time, butif you don't finish and you
stay in debt for the rest ofyour life, you're going to pay a
(09:29):
whole lot more in interest.
Yeah, exactly.
Brad (09:32):
And that's the part that they miss.
It's like, but you're lookingat it in perfect world, Perfect
world people don't follow itperfectly.
Chris (09:40):
Well, life doesn't go 100% perfect according to plan.
If it did, you probablywouldn't be in debt.
I wouldn't have been in debt,none of us would have been in
debt.
We wouldn't be here talkingabout this.
Brad (09:50):
Yeah, yeah, totally agree.
So share real quick what aresome of your guys' favorite
parts about it?
Obviously, Chris, you kind ofalluded to the psychology behind
it.
I think for me it's just it'sgetting those quick and easy
wins.
And by focusing on that, youknow, on the debt snowball,
where you list your debts, debts, and we're going to kind of go
through this step-by-step guysfrom here in just a minute.
But you basically you knowwe'll list your debts smallest
to largest, by balance owed,instead of interest rates, and I
(10:11):
think for me it was like payingoff that smallest debt first.
That felt great, Like I wasn'tmaking any progress at all in
getting out of debt, savingmoney.
But when I finally built thatfirst emergency fund and then
was able to pay down a debt,it's like we actually can do
this and I think that was a gamechanger for me.
It actually made it seempossible.
Chris (10:33):
So you talk about the quick win.
Yeah, I would imagine everybodyout there listening who has
debts.
You probably have one debt thatthe balance is so small that if
you really put your mind andtime and effort to it, you could
probably pay that off within amonth, two months at most.
All right, Everybody's got oneof those debts.
It's so low balance-wise thatyou can accomplish that, and
(10:57):
maybe that's your only goal.
And that's the thing I likeabout the debt snowball, as it's
described here, is that quick,easy victory.
Like you mentioned, You've allgot one.
All right.
When you gain that confidencelike anything else in life, that
light bulb moment, it helps yourealize I can do this and it
helps you realize that, hey,that next debt, which probably
(11:19):
doesn't have that much more of abalance than the first one, is
certainly achievable.
And at the end of the day, ifyou pay off that first debt this
is what I like about this youat least have paid something off
, as opposed to the other method.
If it's the highest balancethat you have, you may not ever
get it paid off.
Amber (11:37):
Well, if you're anything like me, not being in control of
something is very hard for me.
Paying that first one just gaveme that sense of control back,
like, oh my gosh, I got this, Ican do this, and then paying off
the next one and the next one,like at some point in this dead
snowball.
I was almost gamifying it atthat point because I'm like I
(11:59):
could do this and it just gaveme that sense of control back,
which I mean.
The wins were great, I wascelebrating, it was awesome.
Ryan (12:09):
But that control man, wow, that was big.
Well, I think I mean, for us itwas just we were diluting our
efforts so much and I thinkthat's the snowball for us
(12:33):
no-transcript, not going to dothat on five of them and we're
going to put all that, even ifit was like a lot of times when
we were paying extra.
We're not talking like tonsextra, it was like 25 or 30
bucks a month.
Well, if you have five or sixbills that you're doing that
with, I mean that's $180, $150,$180 that you can put towards
(12:54):
that smallest bill.
And it's like when we started,when we rewired and started
doing that, it was like whoa,kind of like you, amber.
It was like, oh, like I havemore money than I think, because
I weren't even thinking aboutit.
We were just thinking we'remaking progress on all of them
and when we just focused on oneman, we really could make some
progress.
Chris (13:14):
And so, amber, you mentioned the word gamify, and
that's exactly what I did.
I looked at my next debt andsaid, okay, it's $500, enough to
pay it off, and every dollar isa point.
How do I come up with 500points?
And I treated that debt like itwas one game in a season and
all of my debts were a wholeseason, and so I had to get
through one game to be able toget to the next game.
(13:35):
Okay, that's one way that Igameified it.
The other one was I looked atthe total amount and said, okay,
it's 90, it was like 95,000roughly.
I don't have to come up with$95,000.
I have to come out with $100,950 times and seem much more
manageable that way to gamify it.
So I love that word, amber.
Brad (13:56):
Well, I think gamifying it also creates the momentum or it
creates that confidence that wedon't have Any sort of action
like Ryan you said you pay offsmall debt or you focused on a
small debt Any sort of actioncreates results and those
results create confidence andobviously the more results that
you get, the more confidence youget, the more momentum you get.
And I think that's really thereal secret sauce behind this
(14:19):
snowball.
And we've had so many memberswho have done this where they
say, like Amber, you saidgamified or it almost becomes
like addicting you know, likeI'm getting so addicted it's
becoming almost fun and peoplesay that like fun to pay off
debt because they start to feelthat confidence, that momentum.
Who knew the word fun would be?
Amber (14:36):
associated with paying off debt.
Chris (14:38):
That's exactly how I felt .
Ok, you can add me to that list.
There came a point in which, OK, listen, how can I come up with
more money to pay this nextdebt off?
And every decision, everydecision about how to spend
money came down to is it worthspending money for that or worth
buying points in this game?
That's sort of how I looked atit, and the further I got into
(15:01):
it, the more competitive Ibecame with myself.
And it was fun.
It was a lot of fun once it gotgoing All right, guys.
Brad (15:09):
So let's talk about how we set this up.
So we're just going to kind ofgo step by step.
So first you just can take anypiece of paper.
In fact, we give out our DebtSnowball Worksheet in our Life
Without Payments Workshop.
So if you want to go on ourwebsite, go under tools on the
website.
You'll see the Life WithoutPayments Workshop there.
We have the worksheet there.
It has the instructions in it.
So if you want that, sign upfor the workshop.
You're also going to get agreat workshop with it too.
(15:31):
But also you get this DebtSnowball Worksheet to kind of do
this work that we're talkingabout.
Want to list all of your debts,so write out all of them.
And this is probably maybe themost overwhelming part of the
whole process is really tallyingup how much total debt that you
have.
And you guys, can you guys talkabout when you guys did this
for the first time?
I remember when I did it forthe first time it was like, okay
(15:54):
, it's as bad as I thought itwas and it feels really crappy.
Amber (15:59):
It just makes it real.
It made it real for us, yeah.
Chris (16:02):
For me, it was more about I knew how much we owed.
That wasn't necessarily asurprise.
When it came to budgeting andgoing back and looking at where
we spent money and how we werespending money, that was the
punching, the gut.
Ryan (16:18):
Yeah, and I would just say this was an exercise that is
easy to pretend is not as bad asit is.
What I mean by that is likeit's easy to just kind of sit
down quickly and be like, ohyeah, oh yeah, and I owe this
and that's what I owe, but thenyou're really not taking into
account, like oh, I owe money onmy car, oh, I owe money on that
other car, oh, I owe money onyou.
(16:45):
Don't really you're not reallyprocessing it.
So, like for me, like when wesay, list all your debts, like
really take your time and gothrough everything, the feeling
sucks.
I don't think we've ever foundanybody that was like, oh, I did
it and I feel so great.
I mean, everybody, I think,feels just absolutely terrible
and it's a gut punch.
But it's also the first stepand like what Amber said earlier
, of like taking control.
If you do this kind of, youknow you don't take it seriously
and you kind of do it.
(17:06):
It's because we did that acouple of times.
We just kind of tried to avoidbecause we didn't really want to
see the whole number.
We wanted to see the stuff Iwas willing to take
responsibility for, but I didn'twant to see the rest of it, so
you got to really sit down andwrite down, so you have the
exact amount that you owe oneverything.
Chris (17:22):
I want to point out here because I've heard this question
a lot of times from people.
You say list all of your debts.
Well, I think, if I'm correcthere, what we're meaning by that
is every debt car, student loan, credit card, et cetera with
the exception of a mortgage ifyou have one.
Is that correct?
Correct, yeah.
Amber (17:40):
Okay, and include personal loans too.
Just because you're not owinginterest to your mom, it still
counts, yeah.
Brad (17:46):
Yes, everything.
Yeah, make sure you listeverything.
And then make sure, when youlist that debt, obviously you
want to make sure you understandwhat all the minimum payments
are for those debts, becauseyou're going to list that along
with it.
And then what the point of thedebt snowball is is then you're
going to make all of yourpayments, all the minimum
payments, except for that firstsmallest there, and it feels
really good to get that firstdebt paid off.
(18:07):
In fact, I think when I firststarted, I think I paid off the
first two or three debts withinthe first two months, and paying
(18:29):
off three accounts was awesometo be able to check that stuff
off.
Chris (18:33):
Yeah, and there's less on your snowball at that point
Right.
The more you pay off your debts, the easier, to some degree,
the rewriting or the managing ofthe debt snowball becomes.
Brad (18:44):
Yeah, so once you pay off that first small debt, then
you're going to essentially takethat minimum payment from the
first debt and roll it into thesecond debt on your list.
So let's say, for instance, tomake math easy, your first debt
had a minimum payment of $25.
Your second debt has a minimumpayment of $25.
Well, being that you alreadypaid off the first one, you're
(19:05):
going to take that $25.
You normally would have beenpaying on the first one.
You're going to roll that intothe second one, paying now $50.
But the key to the debtsnowball and making it work
faster is also having a reallygood budget and taking any extra
money that you have and puteven more on top of that $50
(19:25):
payment.
So you're paying it down andyou're increasing the speed of
how fast you're paying down someof these debts by focusing on
just that next debt while makingthe minimum payments on the
others.
Ryan (19:34):
Yeah, and really, where you'll start seeing the
compounding differences in thisis typically your bigger debts.
Like you start small to gainmomentum and to gain like, okay,
I can do this, it makes youwant to do the next one.
But typically, as the as youget to your next debts, they're
usually higher minimum payments.
They're usually a hundreddollars, $200, $300.
(19:55):
Well, once you pay that off,now you're not rolling $25 over,
you're rolling two or 300 intothat next debt, and so you pay
that off.
Now you're not rolling $25 over, you're rolling $200 or $300
into that next debt, and so youpay that one off and now you're
rolling, okay, that $200 or $300.
Maybe your next debt was also$200 or $300.
Now, when that one's paid off,you're rolling potentially $500
to $600 into the next debt.
So the more you do this, itjust compounds on itself and it
(20:16):
makes it go that much faster,right.
Brad (20:20):
Well, and I think it also gives you.
You know, a lot of peoplealways have the question of Brad
, I got a sum of money maybe itwas a tax return or inheritance
or a bonus at work and they'realways like, well, what should I
do with that money?
Well, if you're working theplan that we talk about here,
you already know the answer.
You're going to take that lumpsum of money and you're going to
focus on your smallest debtthat you're working on.
(20:40):
And I think that's the coolpart about this is that when you
get these extra, you knowbecause we all see that, whether
it's, like I said, a tax returnor a bonus or something like
that, comes into our hands, youcan now take that money and make
tremendous headway in payingdown debt because you have a
plan that you're working on, asopposed to you know, when I used
to get windfalls, no, I wasn'tpaying off any debt, I was
(21:01):
spending it right.
But when you get motivated, youwant to just pile more and more
on that debt.
Amber (21:06):
It's funny how your mindset shifts as soon as you
start doing this, and then thebehavior changes and you're
focused on it, and when awindfall comes like that, you're
like yeah, no, I don't need thetoy that I was thinking about,
I want to pay this off need thetoy that I was thinking about.
Chris (21:21):
I want to pay this off.
Yeah, it's like I can knockfour out of seven debts off the
list.
Wow, that's over 50% of it, atleast visually.
I want to point out one otherthing here, and I'm not sure
where this goes in the list, butfor many folks, when you do
your debt snowball, there isprobably going to be one, two,
three car payments in theresomewhere, and car payments are
(21:44):
designed from the very beginningto have a set payoff date.
You make X number of payments, xamount of dollars for X number
of months and it's paid off, andmany times at least my
experience is the car paymentsare going to be some of the ones
lower on the list, is the carpayments are going to be some of
the ones lower on the list.
And so while you're making thatminimum or required payment on
that car loan, you are graduallypaying that balance off.
(22:07):
And so when you get to thatpoint where maybe the car loans
are the last couple of thingsleft on the list, you don't have
as much to pay off as youperhaps thought you would when
you get there, because thebalance has reduced itself, and
when you get to that point,you're probably going to find
that you can pay that off muchfaster than you originally
thought.
Brad (22:27):
All right, guys.
So the debt snowball methodisn't just about the numbers.
It's about creating a systemthat helps you stay motivated
and empowered on your journey tobecoming debt free.
And by focusing on just thesmall, quick wins, you'll build
momentum and confidence, whichare the key to sticking to this
for the long-term plan.
So, guys, as we mentioned, ifyou want to pay off debt, if you
(22:48):
want to save more money, if youwant to take better control of
your finances and start seeingsome amazing results and
seriously, guys, just as littleas 30 to 60 days all you have to
do is head over toDebtFreeDadcom, click on the
green button at the top of thepage and I'm going to show you
how you can get started.
Let's talk about death.
Announcer (23:05):
Let's talk about death Turn into a death-free.
Chris (23:08):
death Turn into a death-free death.
Amber (23:28):
And that's how it means it's time for the celebrations
of the show.
First we have Linda.
She says yay, I paid down$5,000 on my snowball plan
working on Down the Mountain,yeah that is awesome.
Brad (23:40):
I love that Down the Mountain.
That's right.
$5,000 is a huge chunk ofchange.
Congratulations, janine.
I was able to pay $1,300 off indebt and I saved $650 towards
my emergency fund.
Janine, congratulations, thoseare great wins.
Chris (23:56):
And Tara says that her September budget is completed
and now she's going to start herdebt snowball to pay down some
debt and she's working with herhusband to reach their goals.
Brad (24:08):
That's awesome Way to go, Tara.
Ryan (24:10):
And Nicolette.
I paid off my third credit carddebt by using the debt snowball
method and I have four morecredit cards to go.
Brad (24:16):
Awesome Way to go, nicolette, as always.
Guys, congratulations to all ofyou guys who are taking a stand
for your financial life and arewanting better.
Hey, we get that getting out ofdebt isn't easy, but with our
help and hopefully with yourconsistency and discipline, we
promise you guys this will besome of the best work that you
guys do in your entire life.
Thanks for joining us ontoday's show and we will see you
guys on the next episode.
(24:37):
You guys on the next episode.
Announcer (24:43):
Thanks for listening to the Debt-Free Dad podcast.
Connect with us on Facebook,tiktok, youtube and Instagram.
Just search Debt-Free Dad.
If you found value in today'sepisode, please leave us a
rating and review.
We so appreciate it.
For resources, show notes andlinks mentioned in today's show
visit debtfreedadcom.
(25:03):
Catch you next week.
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If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!