In the spirit of winter, I’m inspired to write about a tried and true tactic for getting out of debt that is taught by Dave Ramsey and me – The Debt Snowball. This sounds daunting, but is surprisingly pretty fun once you get going with it! Here’s the gist of the strategy that you can start to implement today.

Step One – (The Hardest Part) Write down ALL of your debt. Just the thought of doing this gets your heart racing and your stomach drops, right? Well, once you do this, the worst part is over – believe me! Write down every penny that you owe to someone, including credit cards, medical bills, small loans from family or friends, car loans, mortgage loans, student loans, everything. Make it easier on yourself and don’t do this all in one sitting, but keep coming back to it until all of your good (is there really any GOOD debt?), bad and ugly debt is staring you back in the face.

For most of us who have gotten out of debt and who are now building real wealth, we look back on this task and smile because by doing this seemingly horrible task, we took the first step to taking charge of our finances and ultimately ourselves.

Step Two – (Organizers love this part) Now order all of your debt from the smallest to the largest. Only consider the interest rate when two debts are pretty close in size, then order the one with the higher interest rate first. Your mortgage and school or car loans will be at the end of this list. If you have a lot of debt, it can help to divide it into two lists: one with your more manageable debts that are less than $5000, and one with your larger debts like your mortgage or car loan.

Step Three – (Your To-Do List) Congratulations – Now you have a plan! This list is your new To Do list. Starting with the smaller, more manageable and easy to eliminate debts, pay them off. Make minimum payments on EVERYTHING and put every extra available dollar you can spare toward the item at the top of your list. If your first item is a $500 medical bill or an $800 credit card balance, then most likely you’ll find that you can officially scratch this item of your list in as little as 1-3 months!

Here’s where the term “Debt Snowball” comes in – paying off the smaller bills first frees up more money so you can pay off the bigger bills with larger payments and see your To Do list shrink in no time! This is when it starts to become fun! When you are committed to your goal, making payments and checking items off your debt list is exciting! Every payment gets you that much closer to never having to make a debt payment again and then just imagine what you can do with your income – ANYTHING! And when you do this as a family or a couple, or alongside a friend who does their debt snowball with you, then you’ll see your relationship and confidence grow!

I’m excited to see the snow angels you’ll make once you get your debt snowball rolling!