Debt Elimination Step #3 - Finally, you have to implement what is known as a debt snowball.
The third and final step of this process, implementing a debt snowball, is a step that could easily require several years depending on how much debt you are dealing with. Once you have completely stopped using credit, and once you have managed to save up a decent working emergency fund, THEN and only then will you be able to attack the currently existing debt. You should be attacking it with serious vigor, throwing absolutely everything that you can at it.
Many people say that you should be paying your debts with the highest interest rates first. This may make a lot of sense mathematically, but it is not the only option that you have available to you. Instead, what you should be doing is looking at other options for debt repayment and what kind of results they will create for your debt repayment.
There are at least two different approaches that you can take when it comes to the elimination of the debt that you have accrued. From a psychological standpoint, the concept of creating a debt snowball is going offer exceptional payoffs that will be capable of leading to further reduction of your debt. This is not a new concept - In fact, many financial experts are starting to preach the benefits of using the debt snowball approach to eliminate your debt in a way that builds intense momentum. Here is the short version of what you need to do in order to make this happen:
Step #1 - First and foremost, you need to put your debts in order from the one with the lowest balance to the one that has the highest balance.
Step #2 - Now you need to designate the specific amount of money that you are absolutely going to pay to your debts every single month.
Step #3 - The third step in the process is to make the minimum payment on all of your debts, except for the few that have been identified as those bearing the lowest balance.
Step #4 - Now you want to throw every other penny that you have on hand at those debts with the lowest balances, taking one at a time.
Step #5 - Finally, when all of that debt is gone, you should throw everything you have at the debt that has the next lowest balance without altering the amount of money that you are using to pay your debts.
The debt snowball is a really intriguing idea for building momentum up while you are working to overcome your debt. While this method of debt reduction is not for everyone, it may be just the ticket to helping you overcome your own personal debt issues once and for all.
Photo Credits: Great Beyond
Originally posted 2009-09-03 03:54:16. Republished by Blog Post Promoter
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1 comment so far ↓
This debt snowball method is much more effective if you tackle the debts with the highest interest first. Otherwise you will continue to pay high interest year over year on the items your paying minimums on.
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