It’s a snowy day outside, and I’m starting to realize that I can’t handle the cold as well as I used too! Makes me think I was a little bit crazy going outside in this mess as a kid!
So instead of freezing my tush off, I figured I would get metaphorically cold and write an article about the debt snowball (brr!) The debt snowball isn’t as cold as the outside, but it will help melt your debt away!
You might have heard about the debt snowball from someone else. Dave Ramsey, a highly respected financial expert, has done a great job of making this one of the most preferred methods of paying debt off.
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So what is the debt snowball and how is it going to work for you?
The first thing you need to do is write out your debts. For example, you might have the following debts:
Debt 1: $400 at 5% interest
Debt 2: $1,000 at 8% interest
Debt 3: $500 at 4% interest
Debt 4: $2,000 at 10% interest
The goal here is to make the minimum payments on all the debts each month and pay as much extra as possible on the smallest debt. There is no need to pay attention to interest rates with this method, just the dollar amount.
With the above example, you would pay off debt 1, followed by debts 3, 2, and finally 4.Sharing is Caring!Click To Tweet
What makes the debt snowball so awesome?
With the debt snowball, you’re going to start making some fantastic progress on your debts which is going to boost your confidence!
What happens when you pay off your first debt? You’re going to be ecstatic after paying that $400 off quickly. Now you’re pumped and ready to take on the next debt of $500.
The debt snowball isn’t the only method for paying off debt. The debt snowball has worked for many people, and it can work for you.
The snowball works best when you have an effective budget in place, allowing you to pay extra money on debt each month.
What’s your favorite tip to become debt free? Let me know in the comments below!