Copyright © 2012 get-me-out-of-debt.org. All Rights Reserved. Snowblind by Themes by bavotasan.com. Powered by WordPress.
There are many different ways to get out of debt. One of the simplest to use is The Debt Snowball.
Implementing The Debt Snowball
The first thing you need to do when implementing the debt snowball is to determine how much debt you actually have. Take note of each debt, what the interest rate on it is, what the total balance is, and what the minimum monthly payment is.
Next, find out where your money goes take note of how much room you have in your budget for debt elimination purposes. If there’s anything you can cut out of your discretionary expenses, or any additional sources of income that you can consider, this is the time to do it! If that sounds too uncomfortable, you need to revisit your debt elimination goal.
List your debts in order, from the highest interest rate to the lowest interest rate. Except for the first item on your list, your monthly payment for each of your debts should be the minimum monthly payment. For the first item on your list, you should pay everything that you have left in your “debt retirement” bucket every month until it’s paid off. Once it’s paid off, you should add the entire amount you were paying to the next debt on your list. With each debt you pay off, the next one goes faster than the last, hence the “snowball”.
Final Thoughts
There’s more than one way to implement a debt snowball. Some people say that it’s better to rank your debts from smallest to largest, that way you see faster results. From a motivational perspective, that may work better for you, even though you’ll pay more in interest over the payoff period. Either way, do what works for you, and make sure to celebrate your success! Come discuss it on the get me out of debt forum.
[...] any debt elimination plan, you’re going to feel a sense of sacrifice. Depending on the size of your debt burden, this [...]