John & Jane's Debt:
Debt Monthly Payment Total Debt
Macy's Card $60 $500
Kohl's Card $25 $1200
Visa $100 $5000
Car payment $400 $10000
Student Loan 1 $450 $35000
Student Loan 2 $500 $40000
$1535 $91700
We do everything we can to attack the smallest debt. So we sell things, budget with gazelle intensity, and get rid of that Macy's card balance. So next month our payments to Kohl's would include that $60 a month payment from Macy's.
Debt Monthly Payment Total Debt
Kohl's Card $60+$25=$85 $1200
Visa $100 $5000
Car payment $400 $10000
Student Loan 1 $450 $35000
Student Loan 2 $500 $40000
$1535 $91700
So instead of paying off Kohl's in $1200/$25 = 12 months. We pay it off in $1200/$85 = 14 months. But not only that we were so excited about paying off Macy's we are putting every penny we find into Kohl's so realistically it will be paid off in less than a year. After Kohls is paid off the payment to visa will be $85+$100... do you see what's happening? We are rolling the payments into one and destroying the next debt on the list.
What about interest rates? As Dave Ramsey says: "If we understood math, we wouldn't be in this mess to begin with." Paying off smaller debt first gives you quick wins and fuels you to keep going. Anyone can do this. Unfortunately our debt snowball is MUCH bigger:
| Loan | Monthly Pmt | Total Debt | |
| Credit Card | $ 250.00 | 9,850 | |
| ACS | $ 114.98 | 10,217 | |
| Citi Student | $ 80.00 | 14,674 | |
| CapitalOne | $ 502.52 | 14,676 | |
| M Student Loan | $ 675.00 | 51,770 | |
| SallieMae | $ 245.56 | 24,505 | |
| GreatLakes | $ 466.66 | 66,106 | |
| SLP/Access | $ 919.00 | 91,232 | |
| Brazos | $ 508.00 | 124,855 | |
| AES | $1,272.00 | 173,040 | |
| $5,033.72 | 580,925 | ||
