When you get to the point where debt becomes too much you begin to search for a way out. There are many different options to get rid of their debt; one option is the debt snowball. This debt relief option sounds more unusual than it really is.
What is it?
What is the debt snowball? It is a very widespread approach used to relieve an individual of any debt. If you can picture a snowball it starts of small, and then it gets bigger as it picks up momentum. The debt snowball also can gain momentum as you pay off your debts.
The debt snowball method was made popular by a man named Dave Ramsey. This method has gained recognition because it is the most common debt reduction method that many financial experts teach.
The way to begin a debt snowball is simple. Write down ALL of your debts. Do not forget any no matter how small or insignificant they may seem to you. The next step to do will be to place the list in order based on amount of owe. Start with the smallest debt on top and the largest debt on the bottom.
Start the debt snowball by paying minimums on all of your debts except the smallest one. Place any extra money to that smallest debt. This will make that debt paid off much quicker.
After that balance has been paid off, you are able to place not only the extra money each month, but now also the minimum balance of the first debt you paid off. You complete this process for each of the balances going down the list. As you, pay off one debt the amount that you have available each month will increase and you will begin being able to pay off other debts quicker.
This one question has never been answered beyond doubt. There are people who say, “Yes this is the best way”; there are others that do not believe this is best.
It would appear that a debt snowball could be mathematically unbeneficial to many people. It would seem that paying off the highest debt or the highest interest rate might be better options. In this situation, a person is not looking for the math to work, but to find a way to feel like you are getting somewhere. There are so many reasons that people keep trudging on when it comes to relieving debt. One of the biggest reasons that a person keeps moving forward is by seeing that the debt snowball is actually working. Watching the number of debts that you have being reduced is a great way to see your debt disappear.
There are several different things that you can do to help along the process of the debt snowball.
- It can be important to use intensity to your advantage.
- Take note that many lenders (car or mortgage lenders) usually apply any extra money to the next month’s payment. Keeping in contact with your lender to let them know you want it to be applied to the principal.
- Keeping a budget can be very important to the debt snowball process.
- Everyone involved in your finances needs to be involved in your plans to use the snowball method.
- It can be very important to make a true commitment to use any and all unexpected money that you gain towards paying off your debts.
- With a goal in mind you will can always get better results.
- Be patient, it takes time to get your debt snowball rolling. Set yourself up a payment plan and use it get you motivated to help you get the ball rolling.
- Creating a worksheet, projecting the amount that should be required to pay all your debts, as well as determine a timeline to have a completed paying off all your debts.
- There maybe times that you will need to earn extra money to begin the process. This can be through a part time job, freelancing, or even side work for friends and family.
There are many different reasons that a person might want to get rid of their debt. There are even many different ways to get out of debt. However, one of those ways is through the debt snowball process. Starting from the lowest to the highest debt can be a great way to see the results of your debt disappearing quickly.
Finding the best process for you when trying to relieve yourself of debt can be one of the most satisfying rewards. The debt snowball may seem like a long process; from the beginning, you will see changes in your debt. Being able to see your debts reduce quickly at first can be a great way to motivate yourself to continue the debt snowball process.