The Debt Snowball Method
The debt snowball method is a popular strategy for paying off credit card debt and other forms of consumer debt. The basic idea behind the debt snowball method is to pay off your debts in order of smallest to largest, regardless of the interest rate. The theory is that by paying off the smallest debts first, you will be able to quickly see progress and gain momentum, which will help you stay motivated to continue paying off your debts.
Here is how you can accomplish the debt snowball method:
- List all of your debts: Make a list of all of your debts, including the creditor, the balance, and the minimum payment.
- Order the debts by balance: Arrange your debts by balance, starting with the smallest and working your way up to the largest.
- Make minimum payments: Make the minimum payment on all of your debts except for the one with the smallest balance.
- Attack the smallest debt: Apply as much extra money as possible towards the debt with the smallest balance. For example, if the minimum payment is $50 and you can afford to pay $100, apply the extra $50 towards that debt.
- Repeat the process: Once you have paid off the debt with the smallest balance, take the extra money that you were applying to that debt and apply it to the next smallest debt, and so on. As you pay off each debt, you will be freeing up more money to put towards the remaining debts, allowing you to make larger payments and pay them off faster.
- Track your progress: Keep track of your progress as you pay off each debt, and celebrate your wins along the way. This will give you motivation to keep going and stay committed to the process.
An important thing to keep in mind is that the debt snowball method will not necessarily save you the most money in interest charges, because it doesn’t focus on paying the high-interest debt first. However, the psychological benefit of seeing small debts being paid off may help you stay on track, and the small wins will give you motivation to pay off larger debts as well.
It is important to note that if you have any trouble with paying the minimum payments or you see that it will take you a very long time to pay off your debts, you may want to consider reaching out to a debt relief company like ccdr.ca that can help you come up with a personalized plan to repay your debts and potentially even reduce the amount you owe.