Get your snowballs rolling with this helpful debt-reduction strategy.
Paying off your debts is never easy. Especially when you have multiple accounts you need to settle. Fortunately, there’s a lot of ways you can get rid of your debt, but if you want to get rid of it fast, here’s a method for you. The snowball method.
What’s a snowball method?
The snowball method is a debt-reduction technique that is unlike other more conventional strategies. It’s a method where you pay off your debts from the smallest to largest, regardless of the interests. Then after closing the smallest account, you move on to the second smallest and so on.
How does it work?
First, you have to sit down and list all of your outstanding debts. Though this may seem hard for other people, this step is necessary. Why? Because after listing down all your debts, you can have a good look at how much you really owe. And it can help you assess your capability to pay all of your loans. After listing them from the smallest to the largest amount, it’s time to allocate the budget.
Put your money where it’s needed
Once you have all your loans listed down, time to adjust your monthly budget. Continue paying the minimum payment for all your loans except the smallest one. For your smallest debt, you need to pay as much as you can. Say you have a medical loan worth $600 with a monthly payment of $50 and a car loan worth $7,000 with $150 monthly. Pay your minimum monthly dues for your car loan diligently and pay as much as you can on your medical loan. If you happen to have an extra $500 for working extra shifts, put it all towards the medical credit. In that way, you can close that account as soon as possible.
Pay. Close. Repeat.
Keep doing this method until you’re able to pay off all your debts. The thing about the snowball method is because you’re eliminating the easiest ones first, you can see immediate progress. Whereas when you tackle the largest ones first, it might take you quite some time. Being able to cross out debts on your list gives you motivation and boosts your morale. So, as you continue doing the snowball, you’ll find yourself getting fired up.
What are you waiting for? Organize your debts and see if the snowball method works for you.