George Kamel - Best Way to Pay Off Debt Fast (That Actually Works)

Episode Date: August 14, 2023

Today, we'll go over the FASTEST way to pay off debt, so you can start knocking out your debt as fast as humanly possible and begin to invest for your future. Links: Debt Snowball Calculator I love a good deal, when you sign up using this link, I’ll hook you up with a 14-day free trial and $15 off your first year of the premium version of EveryDollar. Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

What's up guys, George Camel here, and today we're talking about the hands-down absolute best way to pay off your debt. And that is the debt snowball method. Now, people who use this method, on average, are debt-free in just 18 to 24 months. Why? How? Because it actually works. Unlike the ice cream machine at McDonald's. It's broken. So today, we're going to go over the debt snowball method and how it works so you can start knocking out your debt as fast as humanly possible. Then you'll finally be able to start saving and investing for your future.

And who knows, maybe one day you'll have enough money to buy your own McDonald's franchise and fix the dadgum ice cream machine. What's a guy got to do to get a shamrock shake with his happy meal, huh? Is it that difficult? And speaking of happy, you know what would really put a smile on this bearded baby face? If you just hit that like button, share this video, and subscribe to this channel so you never miss another one of our delicious McV videos. Okay, I'm... I'll stop. You can't just add Mick in front of things, okay? It's not funny. It's childish and it's immature.

And it's copyrighted. McLevin? What kind of a stupid name is that, Fogel? What are you trying to be an Irish R&B singer? All right. There's a ton of conflicting advice out there about the best way to pay off debt. Some people are pushing debt consolidation,

which is where you combine your debts into one giant payment by taking out another loan to pay off your existing debts. That's a big nope from me. Nope. Think about this for a second. We're going to use more debt to pay off debt.

Yeah, not a good idea. You're just shuffling your debt around, okay? You're just moving stuff to the junk drawer instead of actually cleaning it out. So what you need is a plan to pay that junk off. We'll need Bob to voice that. Okay, a little more aggressive than I would have liked,

but the point was taken. So there are two main ways people choose to pay off their debt. One is what's known as the debt avalanche method. Sounds epic, right? Avalanche is wrong. With the debt avalanche, you pay your debts off in order from highest interest rate to lowest interest rate, regardless of the balance.

Now, this might sound like smart math, but here's why it's not. Debt isn't really a math problem, It's a behavior problem. And if you want to change your behavior and get out of debt, you need to stay motivated. And we're not debt-paying robots. We're humans.

We have feelings and faults in the occasional urge to finance a Ford Focus. Focus, there's pizza on your focus. So the way that you pay off your debt has to take this into consideration. And that's why the debt snowball method is the best way to do it. Like I said earlier, people who use this method,

on average, are debt-free in just 18 to 24 months. And it's not just Dave Ramsey and me saying this, It's also researchers from the Harvard Business Review. This is a proven method that just works. Okay, don't try to fix it. It ain't broken. So how does the debt snowball method work? Well, to put it simply, you pay off your debts in order from smallest to largest balance, regardless of the interest rate, which gives me flashbacks to high school dodgeball,

because as the smallest one, I was the easiest to take down, but I put up a heck of a fight. Now, once that smallest debt is paid off, you take that entire amount that was going toward that debt and apply it to the next smallest debt on your list. And as you do this, you gain momentum as you knock out each remaining balance, like a big, beautiful snowball rolling down a freshly frosted hill. Next thing you know, batap, batap, you're debt-free. So let's recap.

Here's the debt snowball in 40sie steps. Step one, list your debts from smallest to largest regardless of interest rate. Step two, make minimum payments on all of your debts except for the smallest one. Step three, throw as much extra money as you can onto that smallest debt until it's gone. Step four, repeat until each debt is paid in full. Now, before you jump in the comments and start yapping about interest rates, let me just say, I don't want to hear it. That's the debt avalanche method, and we've already talked about it.

Again, this is not just about math, it's about behavior, about actually following through all the way to the finish line. You need those quick wins, you need that momentum. Think about it. If your largest debt is a student loan with a high interest rate, do you know how long it's going to take to put a significant dent in that giant balance? Think it's going to be a long, long time. Yeah, that's right, Rocka Man.

You're not going to feel like you're winning for a long, long time. time. But when you use the debt snowball method, you get quick wins sooner. You pay off that smallest debt super quick. You're going to be jumping up and down like a Trekkie who just met William Shatner at Comic-Con. That debt is out of your life forever. And that gives you something magical called hope and motivation and progress. And then you're on to the next one, and the next, and the next. And suddenly, you're putting hundreds of dollars a month toward your debts instead of tiny little minimum payments. And trust me, when you see that snowball actually working, you'll be more likely to stick to it and become debt.

debt-free faster. You see, when it comes to debt payoff, you want to be fast and furious, but you don't want to Tokyo drift back into debt. The debt snowball method is a cornerstone of the Ramsey Baby Steps, which is the plan that I followed to go from negative net worth to net worth millionaire. When I started this plan, I had $40,000 in consumer debt between my student loans and my credit cards. And after 18 grueling months of budgeting and living on less than I made, and side hustling and Ubering and lifting and selling stuff and eating rice and beans, or in my case, lean cuisines. I paid off all 40,000 of my consumer debt using the debt snowball method.

So consider this a testimonial. This stuff works. And here's a fun fact. If you're using every dollar, which is the budgeting app that I use, it makes this super easy for you. Because when you're entering your debts, it automatically puts them in the right order for you from smallest to largest. One less brain calorie to burn.

I get a lot of questions about the debt snowball method, so I want to address some of those now in this video instead of replying individually. to 158 of you in the comment section. Question number one, what do I do with two payments that have the same interest rate? Okay, easy answer here. We're ignoring the interest rate,

so just pay the one with the smallest balance first. You want quick wins here, that's what this is about. Question number two, how do I stay motivated when it's taking a long time? Great question. The debt snowball can feel like a grind, especially when you're chipping away at some of these bigger debts.

But most people are done within a couple of years, but if you have a lot of debt, it could take longer. Like my friend and co-host of the Ramsey show, Jade Warshaw. It took her and her husband Sam seven years to pay off almost a half million dollars in consumer debt. But it can be easy to get discouraged

when you're eating rice and beans at home, while your friends are outbacked steakhouse, stuff on their face with a bloominion. So here's some things you can do to keep up the momentum. Number one, create a visual reminder of your money goal. You can print out a tracker for your fridge, put a sticky note on the bathroom mirror, make your phone background, your debt payoff journey,

whatever you need to do, keep it visual and in front of you every single day. Number two, revisit your why. You're doing this for a reason. So think about that. Keep that front of mind. Maybe you want to change your family tree. You want to avoid the mistakes your parents made.

You want to retire with dignity. You want to be a homeowner. You want to have a family one day and not be burdened by debt. These are great reasons to get out of debt. So keep your why front and center. Third, find people who can keep you motivated and accountable. If you're surrounding yourself with broke people who don't care about your money journey or growing, that's going to keep you broke.

So get around other people who are also growing. Get a friend who wants to budget with you. you on the weekends. Get your spouse on board and get them fired up about this. Join a financial peace university class to get around other weird people who want to stop being normal and broke. These are some great ways to get some community in your life. And lastly, stop comparing yourself to other people and acknowledge how far you've come. This is a weird thing you're doing. It's a hard thing you're doing. So you've got to celebrate the little wins. Stop comparing yourself to other people and acknowledge how far you've come. Celebrate the little wins. Stop worrying about

what someone else did and where they're going on vacation and what cars are driving. Run your own race. Question number three, should I pause my debt snowball if I have to use my emergency fund? Yes, the debt snowball falls into what we call Baby Step 2 in the Ramsey Baby Steps, which means you have $1,000 saved up as a starter emergency fund to act as a little buffer between you and life, and then you move on to debt payoff. So if you have an emergency and you've got to use that starter emergency fund, temporarily pause the debt snowball. Just keep making minimum payments while you rebuild that fund as fast as possible and cover that emergency. Once you're back to $1,000, restart that debt snowball.

Question number four. If I already have money saved, should I put that toward my debt snowball? Love this question. So if you've got any non-retirement money saved up, let's say in a savings account, or you invested in some stocks outside of retirement, you should sell those, liquidate those,

and throw it towards your debt, everything except that $1,000 starter emergency fund. So if you have $20,000, liquid cash, bring it down to $1,000, and throw the other $19 at your debt. Now notice I said non-retirement funds. You do not want to liquidate retirement funds because those come with a huge tax hit and early withdrawal penalty.

But if you're worried about liquidating your savings and losing all that hard-earned money, don't worry. We're going to get you back to a fully funded emergency fund of three to six months of expenses once we're out of debt. That's baby step three. Save up an emergency fund of three to six months of expenses. Question number five. If I'm a Christian, should I tithe while getting out of debt?

I believe the answer is yes. And I know a lot of you are already, you're running to the comments section. going, I can't believe he's telling people to give while they're in debt. Listen, if you're not a person of faith, this doesn't apply to you. Just keep scrolling. Just fast forward through this question. But if you claim that you're a person of faith, I think the Bible is very clear, that we should be givers, that we should be generous.

Not when we're out of debt, not while we're in debt, just give across the board. So when you do your budget, if you're a Christian, type 10% off the top, that's your first fruits, and then move on and attack the debt. And I'm telling you, it's not going to hold back your debt. It's not about all that much, but it will change your heart forgiving. and that habit will carry on through your wealth-building journey, and it's going to make it that much richer and that much sweeter. All right, now that you know the debt snowball method is the best way to pay off your debt,

no more excuses. Get that snowball rolling, Olaf. Now, I'll be honest. It won't be a cake walk or a walk in the park or a piece of cake. Come to think of it, there's not much walking or cake involved here at all. It's going to take some time and it's going to take some effort. But I've seen thousands of people, including myself, crush their debt using this debt snowball method.

So trust me, you can do it and it will be worth it. So if you're ready to get started, check out our debt snowball calculator. You can plug in your numbers and it will show you how fast you can be debt-free. It'll show you your debt-free date. Yep, that's right. Your debt-free date is just as predictable as the plot of a homework movie. So I'm going to drop a link to that in the description below and let me know in the comments when your debt-free date will be,

and we'll all celebrate together, have a little party. As always, make sure to subscribe to this channel, like the video, and share this with your friends who are currently at Outback Steakhouse, stuff in their broke face with a bloomin onion. You'll show them. You're going to buy everyone a blooming onion. You know what? A round of blooming onions on you when you're dead free.

How's that? Thank you guys for watching. We'll see you next time.