# Pay Off My Bills: A Step by Step Guide

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## A Different Approach to Paying off Your Bills.

If you want to gain control of your budget and are now asking yourself how do I pay off my bills, we’ve got the answers here. Writing all those checks every month and not seeing much progress on your credit card balances can be disheartening. You want to pay your debt balances down as quickly as possible and need a plan. Financial radio show host, Dave Ramsey calls the steps described here, the Snowball plan to get out of debt. It is designed to work like a snowball, paying your debt off faster in larger amounts as the plan rolls along.

## Step by Step Plan

Follow these steps to get a plan started to organize and payoff your bills.

1. Organize the recent statements of your credit cards and other debts with the smallest balance on the top of the stack down through the largest balance.
2. On a sheet of paper make a line for each debt with the current balance, interest rate, and minimum monthly payment. You can use a spreadsheet program to make the list instead, if that is your preference.
3. Total up the minimum payment amounts for all of your debts.
4. Subtract the total of the minimum payments from the amount you have budgeted toward you debt reduction. This extra amount of money will go toward paying down your debt quicker and will be referred to as your “snowball.”
5. Add the snowball amount to the monthly payment of your debt with the smallest balance. Send this amount to that bill. The rest of your bills will be paid by the monthly minimum.
6. Pay the minimum payment plus the snowball to your smallest debt until it is paid off. Then the next smallest debt will become the smallest and receive the snowball in additional to the regular payment until it is paid off. Keep rolling that snowball until all of your bills are paid off.

## How the Plan Unfolds

As an example, you have three bills with balances of \$2,000; \$4,000 and \$6,000 for a total of \$12,000. The average interest rate is 18 percent and the total of the minimum payments is \$270. If you pay just the current minimum payment amount, it will take over 7 years to pay off these debts.

If you plan to use \$400 each month to pay down debt, your initial snowball is \$130–\$400 minus \$270–Add the \$130 to the min payment on the \$2,000 debt and it is gone in 14 months. The snowball then jumps to the next smaller debt and it is paid off 16 months later, and less than 3 1/2 years after you start the plan, all of your debt is paid off! You now have the answers you need on how to pay off my debt faster than you imagined.

## A Couple of Tips

Don’t forget to lock up or cut up those credit cards until the bills are gone. If you truly want to get rid of those debts you cannot use credit until your debts are paid in full.

Download and try out the Debt Reduction Snowball Calculator from the Vertex 42 website. This free Excel template helps you set up your debt reduction plan, calculates how much to send each bill, and tracks your results. Good luck!

## Resources

Dave Ramsey: Get Out of Debt with the Debt Snowball Plan: https://www.daveramsey.com/article/get-out-of-debt-with-the-debt-snowball-plan/

Vertex 42: Debt Reduction Calculator