- Professional budgeter Rachel Z. Hart showed her plan for helping a couple out of $98,000 of debt.
- First, she arranged debts from smallest to largest, known as the "snowball" technique.
A couple asked a professional budgeter to help them make a plan to pay off their $98,000 of debt. Rachel Z. Hart, who shared her plan on TikTok, recommended they use a version of the popular "snowball" technique.
The couple are both teachers, Hart said, though she didn't give their names or other identifying details.
She listed 11 sources of debt, including several credit cards, medical debt, student loans, and car payments. Much of the it had interest rates at 25% or higher. Their total minimum payments alone came to $1,800 a month, she said.
Hart helps people get debt free through her plans at her company Budget Save and Blog. On her website she said she paid her way out of $60,000 of debt even though she loves to spend money.
Here is the breakdown:
- $366.61 on a Zales credit card at 29.9%.
- $822.17 on a hospital bill at 0%.
- $850 from Citizens Bank at 0%.
- $3,343.40 on a Rooms To Go account at 0%.
- $3,700.13 on a Discover credit card at 26.49%.
- $4,804 loaned from their grandparents at 1%.
- $4,844.87 on a Capital One credit card at 23.6%.
- $7,167.64 on a Wells Fargo card at 24.49%.
- $7,910.38 on one student loan at 3.95%.
- $20,524.96 on another student loan at 4.85%.
- $43,715.74 on a car loan at 31.5%.
In total, the couple had $98,087.90 to pay off.
The traditional snowball method involves paying off the smallest debt first, even if it isn't at the highest interest, to create a sense of momentum as each debt disappears.
However, Hart changed up the method a bit to prioritize some debts with higher rates.
She suggested paying off the Zales card first, then skipping to the Discover card, then the Capital One card, and then attacking the car loan, which has the highest interest of all the debts.
@budgetsaveandblog How to pay off debt. How to organize your debt using the avalanche method #howtopayoffdebt #payingoffdebt #howtobudget #budgeting #howtosavemoney #debt #debtsnowballmethod #debtsnowball #thebudgetmom ♬ original sound - Budget Save And Blog
Hart's video amassed 4.5 million views, and generated a lot of discussion in the comments. Some said they would never dream of signing up for a car loan with such a high interest rate.
"I'd walk across the country barefoot before I took out a car loan with a 31% interest rate," one person said. "That should be illegal."
"No wonder teachers don't teach us about taxes and debt," another person said. "They don't even know."
One person simply said, "This is a mess lol."
The majority of people commenting said the couple should probably sell their car. "Tell them to buy a bike," one person said.
Many commenters praised Hart's technique, saying laying out debts in a visual way really helped them understand their own payments better.
"Great method," said one viewer. "We did this and we now own EVERYTHING we have expect my husband's truck."