Today we’ll focus on the Dead on Last Payment snowball. David Bach, famous for the Automatic Millionaire line of books and financial advice, is also a long-running guru of getting out of debt and automating your finances so that things don’t screw up. I hadn’t heard of David before I started doing some of the financial cleanup I had embarked on, but his DOLP method and my home-grown debt snowball were like brothers from other mothers.

I’ve worked to automate as much as my finances as possible so that the various banks, credit card companies, bill companies, etc. can’t get any more over-the-limit penalties, late payment penalties, bounced check costs, or any other cash they shouldn’t really be entitled to.

David is a more calm voice than Dave Ramsey, but the drive and logic of the approaches he advocates still ring true. Both are wanting the same thing ultimately, to get you out of debt. David depends more on showing you the ‘debt elimination system’ or the logical side, than Dave, who concentrates on the mental and emotional side. Both are excellent counselors.

The Dead on Last Payment snowball works as follows;

1) Take all your bills, subtract all the ones w/o ends (utilities, etc) and then create a payment to balance ratio.

P/B Ratio = Balance Due / Minimum Payment.

This should give you a rough order-of-magnitude number for the amount of time in months it’ll take to get rid of the bill normally. It doesn’t take into account interest rates, just the amount due. All the bills are then ordered from lowest P/B Ratio to highest.

2) Pay the minimums on all the bills except the one with the lowest Ratio, and pay as MUCH as you can on that one until it’s gone.

3) Continue to the second lowest Ratio, adding the amount you paid on the first before it was paid off and pay that one,

4) Lather, rinse, repeat,.. and so on down the list of bills until the last bill is gone.

Pros:

• Easy to follow.
• Quick(er) results.

Cons:

• Overall, more interest paid with this method than others.
• Slightly more setup.

Overall: The David Bach DOLP debt snowball has the advantage of having fast initial feedback, while still allowing a more in-control feel. While I was using this one I saw the bills go away quickly, maybe not quite as quickly as with Dave’s snowball at first. The feeling of getting rid of the ‘low hanging fruit’ bills, the ones that could be paid off in a relatively short amount of time, kept me motivated to continue. It also gave me a pretty visible dividing line between the early, easy to get rid of bills, and the heavier, take-a-while bills. It inspired me somewhat similarly to long distance running. I was getting warmed up with the easy bills, and wasn’t disheartened by the bills in the distance, because I knew the race had only begun.

I personally used this one more than the Dave Ramsey snowball, only because it also fed the ‘geek’ in me to do the calculations, and I had thought I had discovered it myself. (I didn’t, I just hadn’t heard of David and his method). The only reason I don’t still use this one, is I feel I’ve graduated from habit to lifestyle, and I’m moving on to the Highest Interest Rate First snowball.

But, more of that tomorrow.

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