Over the past few days, a few more inches of snow has fallen where I live. Yesterday while I was outside, I realized that the recent snow is the kind of snow that makes good snowballs. This means that it is a good time to talk about one sensible strategy for getting out of debt – the debt snowball.
I first heard about the debt-elimination method called the debt snowball when I read Dave Ramsey’s book, “The Total Money Makeover”. It is an effective method for getting out of debt, and I think that part of its effectiveness is that it enables you to feel like you are making progress within a short amount of time. If you feel like you are getting somewhere, you are more likely to keep going, right?
The debt snowball method suggests attacking the debt with the smallest balance first and getting rid of your other debts one by one from smallest to largest. To begin throwing snowballs at your debt, make a list of your debts and arrange them in order from lowest balance to highest balance. Next, designate a certain amount of money to pay toward debts each month. This amount should include whatever amounts you need to pay the minimum payment on all of your debts. Take any other money that you find to spare that month, and add it into your payment for the debt with the lowest balance. This is the part that helps that lowest-balance debt to exit the picture quickly. When that lowest-balance debt is gone, breathe a sigh of relief but do not change the monthly amount that you have allocated for paying your debts. Pay the minimum on all debts but the one with the next lowest balance. You will now have even more money to sling at that one thanks to having eliminated the first one. Keep on going in this fashion until you have successfully paid off all of your debts one by one.
The debt snowball may seem like a simple concept, but that does not undermine its effectiveness. After all, if you think about it, sometimes it is the simple things that work the best. Get out there and throw some snowballs – at the debts that are weighing you down.