Debt Snowball Tips

Written by admin on November 27th, 2010

• Write down all of your debts in the order of smallest outstanding balance to the largest.
• Commit to fulfilling the minimum payment on each of the outstanding debts.
• For the smallest outstanding balance, apply all of the remaining funds that you can muster to it until it is paid off.
• Repeat the steps for the next smallest outstanding debt balance, and so on.
• Continue with this process each month until all of the debts are cleared.

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Debt Snowball Tips

“Debt Snowball” is a plan for paying off your debts. It is an integral part of Dave Ramsey’s “Baby Steps” for complete financial fitness. Instead of paying debts in order of interest rate, from highest rate to lowest, he advises that debts are paid accordingly from smallest to largest outstanding balance.

Ascertain the most money you can use from your budget to “snowball” your debt. Add the extra money available from your budget to the minimal payment for the first debt monthly. Make just the minimal payments to all your other debts. Carry on this process till the first debt is paid back.

Take the payment you were making for the first debt and add it to the minimal payment you were paying for the second debt. Pay that sum of money on the second debt monthly till it is paid back, and then advance to the third debt. Keep on paying only the minimal payment to the other debts.

Reiterate this method till the debts are completely paid off.

It will be soon before your payments gets big, with all your payments to the paid off accounts focused on this “snowballed” debt. Notice that your monthly payment to the targeted debt increases, although the living expenses that you have allowed yourself from the budget remains the same throughout the process.

A lot of folks have attested as to Debt Snowball effectiveness. It simply takes motivation.

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