If you’re struggling with credit card debt, you may grab hold of the Debt Snowball Method to help find your way out of it. What you need is the patience, determination, and planning to follow the steps in the Snowball Method and make it work in your favor.
Steps to snowball your debt
1. List your debts – List your debts from the smallest balance to the largest balance without taking into account the interest rate on them. If you find two debts have similar balances, consider the one with the highest interest rate first. (I know there will be people that scream that the highest interest rate should always be paid down first…but money is emotional, so trust me – you’ll have a better chance doing it this way!)
2. List the monthly payment on your debt – Note down the minimum monthly payments on each of your debts you need to pay.
3. Pay off your smallest debt – Try to make extra payments toward your smallest debt so to pay it off as quickly as possible.
4. Make minimum payments on all the others - Make a budget so that you are able to pay the minimum payments on each of your debts except the smallest debt as described above (pay as much as you can on it).
5. Direct funds to the next smallest debt – After you have completely paid off the smallest debt, use the money that USED TO be used to pay this debt, and direct all of it to the next smallest outstanding debt. THIS IS KEY! All of this extra money (from the smallest debt that you no longer have to pay) goes straight to principal, which is the key to the system.
6. Continue this process – Repeat this process until you have gradually paid off all your debts.
Advantages of The Debt Snowball Method
Here are some advantages you may find when you use the Debt Snowball Method to get out of debt.
1. Quick wins – It helps you to get psychological satisfaction when you find out that you are able to eliminate certain debts. This also helps you gain a positive attitude when you see fewer bills coming every month.
2. Provides motivation – The Debt Snowball Method motivates you to think about your financial situation seriously. It also helps you to stick to the plan until you eliminate all your debts.
3. Systematic way – The Debt Snowball Method helps you to pay off your debts in a systematic way so that you don’t stray from the system and think emotionally – you just work the system.
The Debt Snowball Method isn’t the best choice for somebody who is struggling to pay their debts each month. Consider credit counseling or debt settlement (or even bankruptcy) in that case.
The bottom line is that the Debt Snowball Method is recommended by many finance experts to get you out of debt as soon as possible, and give as little interest to the banks and credit card companies as possible!
Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like ‘Credit Score The Quintessential Therapy for a Happy Pocket’, Take Creditors and Collection Agencies to Small Claims Court’ and, My Story- From Depression To a Smile’.
