The Snowball Method: A Budget-Friendly Approach to Eliminating Debt

Let us start off by saying, if you're swimming in a sea of debt, we feel you and you're not alone. We're not here to condescend you with impractical finance jargon. Instead, we're going to introduce you to a budget-friendly approach to eliminating debt - the snowball method!

The snowball method is a debt reduction strategy where you prioritize debt payments by starting with the smallest debt amount first and moving onto larger debts as you gain momentum. Picture rolling a snowball down a hill - it starts off small, but as it gathers speed and more snow, it grows in size - this is the essence of the snowball method.

So, how do you get started with the snowball method?

Step 1: List Your Debts in Order

Make a list of all your debts in order of smallest to largest balance. Don't worry about interest rates or minimum payments at this stage.

For example, let's say you have (don't feel bad if your numbers are larger than this):

• Credit Card A: $500 balance
• Personal Loan: $2,000 balance
• Credit Card B: $5,000 balance
• Car Loan: $12,000 balance
• Student Loan: $20,000 balance

Step 2: Pay Off Smallest Debt First

Now that you have your debts in order, it's time to start paying them off!

Start by paying the minimum amounts on all your debts except the smallest one. On the smallest debt, put as much extra money you can afford, until it's paid off entirely.

Once you've paid off the smallest debt, take the amount you were putting towards that debt and apply it to the next smallest debt on your list. This is where the "snowball" effect comes into play - the amount you're putting towards debt payments starts to increase as each debt is paid off, giving you more momentum to tackle the bigger debts.

Step 3: Repeat Until All Debts are Paid Off

Continue the snowball method by putting all the money you were putting towards the smallest debt each month towards the next smallest debt. Keep doing this until all your debts are paid off.

As you move onto larger debts, your momentum and motivation towards paying off your debts will increase, and you'll be surprised at how quickly you can tackle everything! Before you know it, you'll be making your last debt payment and enjoying a debt-free life.

Key Takeaways

• The snowball method is a budget-friendly approach to eliminating debt.
• Start by creating a list of debts in order from smallest to largest balance.
• Pay off the smallest debt first by putting as much extra money as possible towards it.
• Once the smallest debt is paid off, take the amount you were putting towards that debt and apply it to the next smallest debt on your list.
• Continue doing this until all your debts are paid off.
• The snowball method gains momentum as you tackle each debt, giving you motivation to continue.

In the words of finance mogul Dave Ramsey:

*"The enemy of 'the best' is not 'the worst.' The enemy of 'the best' is 'just fine.'" *

Don't settle for just fine when it comes to your finances. Take control and start using the snowball method to eliminate your debt and achieve financial freedom.