high income, not rich yet

Using the Debt Snowball to Tackle Massive Debt

Using the Debt Snowball to Tackle Massive Debt

“Do you know what a debt snowball is?”  I asked Mr. Graduate Investor last night as we were cooking in the kitchen.  Mr. Graduate Investor was haphazardly browning chicken sausage while I prepped the rest of the ingredients for dinner.

“Sure. It’s when you buy one thing, and you have a little debt. But then you go to school, and you get a lot more debt. And then you buy a house, and a truck, and your debt just grows and grows and grows until it’s hitting you in the face like a snowball.”


Our culture has created a vicious consumerism cycle that is destined to leave many American workers indebted from age 18 until the grave.  Student loans, auto loans, credit card debt, boat/RV loans, and home mortgages.  Debt has become the American way, and the results are disheartening.   And, at this point in time, Mr. Graduate Investor and I have too many combined debts to sit comfortably with me.

This past week I read The Doctors Guide to Eliminating Debt.  This book is applicable to any moderate to high-income professional who has obtained significant debt from student loans, cars, recreation, and their home.  It’s a quick and snappy read – which I highly recommend – in which the author discusses his journey out of debt using the debt snowball method.

To implement the debt snowball method, you simply list all your debts from smallest to large and their minimum payments. There’s an excellent calculator here that will do the math for you.

Then determine if you’re able to trim your budget to allocate any additional funds to your debt payments. The author of The Doctors Guide to Eliminating Debt suggests aiming to allocate an additional 10% of your budget to debt repayment.  Start by paying all the minimums on all your debts but put your extra payment on the smallest debt.  Then, once you have paid off the smallest debt, you take both the 10% extra and the minimum payment and apply it to your next debt.  And so on until you are debt free.

(And, of course, during this time you resist the siren temptation to acquire new debt.)

But the remarkable concept of this book is that for most people, they will be debt free within 7 years.

Why? Because your ability to borrow money is limited by your income.  For most people, that means they will be debt free within 7 years.  Even at today’s lower interest rates, and someone who is heavily in debt (such and me :D), one could still be debt free within 10-12 years.  No mortgage, no student loans, no car payments. Nothing.

Completely debt free.

How would your life change if you lived in a home you owned outright?  If you owed $0 to creditors each month? If each dollar you earned (after taxes – Uncle Sam is never paid off short of death…) went to your own pocket, investments, recreation?   The debt snowball method could give you that freedom.


And yet, at no point before the last year did anyone ever suggest to me that this was a reasonable path to take.  When I first heard of the debt snowball method,  I assumed that it was for those with small debts.  Not massive six-figure student loans and a hefty mortgage.  I read about people paying their debts off in a matter of months, something admittedly impossible given our current debt load.

Yet.  Five years to be free of all non-mortgage debt.  Without substantially altering our lifestyle.

Doesn’t sound so bad.

Maybe this method was for us.  But could it really work?

I sat down and wrote down our debts. I diligently plugged them into the calculator…and the author was right!  Within 5-6 years we could be free of all non-mortgage debt.  Mortgage debt could be eliminated within another 5-6 years.  (Shorter if I’d taken out a 15-year mortgage, but I digress.  I’ll write about it in another post, but consider a 15-year mortgage!)

I could be debt free before age 40 with a little luck.

Nearly every single millennial could be debt free by 40.


So take a moment.  Plug your numbers into the calculator.  Read the book for a little motivation (and other good financial advice).  And let me know what you think below.  Take a look at your monthly budget. Picture yourself in 5 short years, owing not a dime to anyone.


But for now, Mr. Graduate Investor & I are committed to becoming debt free by 40.*

Thoughts, as always, are welcome below.


*or, at least, when I’m 40.  Mr. Graduate Investor is a few years older :).

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