Have you heard about the snowball debt method? If you haven’t, it’s time you do–especially if you’ve got debts to pay off. Let’s talk about the snowball debt method. What is it, and why does it work? Winter is a great time for it!
What is the snowball debt method?
The snowball debt method is a method from none other than financial guru Dave Ramsey. This method helps users pay off debts more effectively and gain the financial freedom we all want.
How does it work?
Just like a snowball that gets bigger and goes faster as it rolls down a hill, a debt snowball does the same. Only it’s your debt payments that get bigger, while your debts get smaller and smaller–at a faster rate than you may think possible!
How to start a debt snowball
To start a debt snowball, you first have to list out ALL of your debts. But instead of listing them according to the highest interest, list them from smallest payoff to largest.
Now get your debt snowball rolling down the proverbial hill by living frugally so you can pay everything you can against that smallest debt. Once you pay it off, take the entire amount you’re paying on it and apply it to the next debt on the list. Each time you move to a new debt, you’re paying the payments of all the previous debts toward it. That’s the snowball.
Why does this method work so fast?
As you pay off debts, the amount that you’re paying on them increases. There’s no minimum payments allowed on the snowball debt method–and that is why it works! Instead of languishing behind constant interest {which never stops} you’re steadily increasing your payments so you can finally get ahead and stay there!
Final Thoughts
People usually pay off high-interest debts first. But if that’s your biggest debt, you may feel like you’re never getting anywhere and lose motivation. The debt snowball helps you feel like you’re gaining traction against your debts–because you actually are. And that’s one of the best feelings in the world!
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