[ad_1]
Two major methods dominate the debt repayment sphere: the debt snowball and the debt avalanche.
One says you should pay off debts with the highest interest rate first. That’s the debt avalanche method.
The other says to pay off your smallest balances first so that you can enjoy quick victories and build confidence.
That’s called the debt snowball method — and here’s how to use it.
What Is the Debt Snowball Method?
Popularized by money guru Dave Ramsey, the debt snowball method involves paying off one credit card or loan balance at a time, starting with the smallest balance first until you’re totally debt-free.
It’s perfect for people who are motivated by quick wins.
However, there’s a downside: You end up paying more interest long term.
Many people disagree with the concept of paying more interest for quicker wins. Why would you pay off smaller balances and let those interest mongers sit?
Because you’re not an algorithm: You’re a human being. It’s important to pick a debt management strategy that works for you.
Whether you want to get rid of high-interest credit card debt or your monthly mortgage payment, using the snowball debt repayment method can help you achieve financial freedom.
The debt snowball method helps you take that difficult first step in paying off debt — and then the next step. And the one after that.
How to Use the Debt Snowball Method
Here’s how to conquer your debt with the snowball method in five simple steps.
1. List All Debts From Smallest to Largest
Start by listing all your outstanding debts. Disregard the interest rate on each.
Then, order them from the smallest balance to the largest. This can be done on paper, a spreadsheet, an app or in a handy-dandy debt snowball calculator.
Include all the debts you want to pay off quickly.
We recommend:
- credit card debt
- Student loans
- Personal loans
- Auto loans
- Unpaid medical bills
- Mortgage-related debt
- Any other stuff debt collectors keep calling you…
[ad_2]
Source link
