Snowball DebtSmart Ways To Save MoneyTrying to pay down bills is pretty stressful; but there is a way out using the snowball debt reduction method. When it comes to debt, it simply works and is a fantastic strategy on how to pay it down fast. Several others, including myself, have successfully used this strategy to dig ourselves out of the abyss. By the way, you're not going to see a fancy snowball debt calculator and a bunch of other bells and whistles. You'll find no fluff here; just nuts and bolts how to pay off debt tips. We're excited to share this with you because there is no better feeling than being debt free. You'll find that once you begin putting this strategy to use, your obligations will continue to decrease to the point of eventually living a debt free lifestyle. Below, you'll find the step-by-step snowball debt method; also referred to as the debt avalanche strategy.
What is the snowball debt or debt avalanche approach?In a nutshell, it's based on neutralizing high compound interest payments that you have to pay on your debt. In other words, you first tackle the debt that you pay the highest interest rate on; then you go after the debt with the next highest interest rate, etc.By doing this, you will pay off your debt faster because you are paying less total finance charges by honing in on your highest interest rate debt. From a numbers standpoint, this is the best strategy for paying down what you owe. In fact, speaking from personal experience, we can tell you that no other debt reduction method will get you out of debt faster and save you as much money. How To Pay Down Debt - Step 1First, you'll want to figure out how much money you have available each month to pay down your debts with. To help come up with this figure please see making a budget. Let’s say you come up with a figure of $400.00 to put towards your debt each month. Excellent, we're on our way to chopping away at your debt.Step TwoYou can write down or use a spreadsheet to list all of your debts. Specifically, you'll want to list the debt, balance owed and interest rate.The key is to sort all of your debts by interest rate from highest to lowest. For example, Sears $2,000 25% Master Card $3,500 18% Student Loan $7,000 9% Car Payment $400 6% Credit Line $5,000 4% Step ThreeYou'll want to make the "minimum" payment on all your debts, except the highest interest debt (Sears) to which you'll put the remaining balance of your monthly $400 towards. Do you see how we're weighting the debt payments towards the highest interest rate debt?For example, after all minimum payments are made, you have $125 left to which you'll use to pay down the Sears debt. Step FourContinue doing this monthly until you pay off that highest interest rate debt (Sears).After paying off Sears, you’ll have one less debt to deal with AND you now have more available monthly money to pay down the remaining debt since you eliminated Sears. Step FiveNow, choose the next highest interest rate debt on your list (Master Card). Again, you'll notice that you have more money to allocate towards the Master Card debt because you eliminated the Sears debt.Don’t forget: you’ll want to make the "minimum" payment on all your debts except the highest interest rate debt (Master Card) first. Keep making those payments until you eliminate the Master Card debt. Step SixContinue to repeat this process by going after the next highest interest rate debt.Do you see the avalanche or snowball effect? Each time you eliminate one of your debts, you have additional money to put towards your next highest interest rate debt; effectively snowballing the process of paying down your debts. For example: After Sears is paid off, you may have $225/month for your Master Card. After Master Card is paid off, you may have $320/month for your Student Loan And it just keeps snowballing from there!! This really works!!
Wrapping It UpWe're happy to have shared this snowball debt approach with you. We're confident, that if you put this frugal technique to use, you will reduce and eventually eliminate your debt.We know you can do this!! Ride that debt avalanche and Crush that debt!!
Top of Snowball Debt Return To Smart Ways To Save Money Return to Frugal Home Page
|
