(This post appeared previously on my other blog, Starting Over … Again. )
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Have you heard about the Debt Snowball Method for debt reduction? It’s a great system to get rid of debt, and it’s worked great for me. I have always tried to be careful with debt (and did a pretty good job for most of my life), but ended up getting sucked into the debt trap anyway. What a nightmare! But the best way that I have found to get rid of debt is by using the debt snowball. Here are some of the things I have learned about how get the most out of it:
- Write out your debts – Ouch! This can be a little painful. Facing the facts about how deep you are in debt is not fun, trust me. But it needs to be done! You need to have a clear picture of your starting point, otherwise you will not have a clear picture of your course of action. You wouldn’t attempt to run a race without knowing where the finish line was located, now would you? 🙂
- Stop spending – Seriously, just stop – getting further into debt by using your credit cards, I mean. Stop digging that hole! It’s deep enough already; that’s why you are in this situation in the first place. You can’t expect to climb out of a hole that keeps getting deeper and deeper. So cut up those cards – get out the big scissors, and make a ceremony of it if you like. Celebrate this first step toward getting rid of the millstone that is debt hanging around your neck.
- Automate any bill paying that you can – If your bank offers automated bill paying – DO IT! Especially for bills like car payments, church tithes, credit line payments, etc. Any bills where you pay the same amount each month are prime candidates for automated bill paying. And while you’re at it – sign up for paperless billing. Most of my bills are sent to me by email, and show up on my online banking when I log into my bank’s website. So easy! And you won’t forget to pay bills and end up paying late charges because you forgot.
- Identify the smallest payoff amount and tackle that one first – pick off an easy one, and “thin the herd.” I know – that sounds like a hunting metaphor, and it is. But you are hunting for financial freedom, are you not?! Ok, that’s corny – I know. 🙂 But it works. Getting a small “win” in the beginning keeps you motivated to stick with it. Then, when that debt is paid off, move on to the next largest debt and tackle that one. But here’s the key – take the amount that you were paying on the first debt and add that to the amount you are paying for the second debt. For example, I paid off Credit Card #1 first and was paying $100 per month until it was paid off; now I take that $100 per month that I was paying for Credit Card #1 (I’m used to having that $100 “spoken for” each month anyway, so it’s relatively painless) and apply that to Credit Card #2’s payment of $250 each month – taking my payment for Credit Card #2 each month up to $350, and thereby paying Credit Card #2 off that much sooner.
The amount of money that gets freed up gets progressively larger, and your debts go down progressively quicker. That’s the magic of the debt snowball!
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I found these tools to be very helpful. They are also listed on my Resources page.
Here is an article that says very much the same thing I have been saying; this matches up well with my own experience. 5 Secrets to Mastering Dave Ramsey’s Snowball Debt Snowball Method And here is the link to Dave Ramsey’s website, and the article about the debt snowball, to get you started: Get Out of Debt with the Debt Snowball
What are your experiences with debt and/or using the “debt snowball” technique? Share them below in the comments! 🙂