Planning To Get Out of Debt?

So you’ve decided that you want to get completely and totally out of debt? This is probably one of the smartest and most important decisions you will ever make. One of the first places to start is with your credit cards. How often do you simply pay the minimum payment due and never give that bill another thought until the next month? You think you’re doing well – after all, you paid the bill, right?

Did you know that only a very small amount of your payment actually goes toward paying off the balance you owe? Most of it goes toward the interest. It could take twenty years or more to pay off a relatively small credit card balance when you are just making the minimum payment. If you really are interested in getting out of debt, you need to focus on paying off those credit cards in full.

One of the best ways to do this is to use the method for paying off any debts that has become known as the “snowball method”. Like a snowball rolling slowly down a hill gathering snow and size as it gathers momentum, so can your bills become paid in full by starting small and working your way into larger payments.

How does the snowball method work? You might think that working towards paying off your bills would have to involve a lot of effort on your part, but it’s really quite easy. First, sit down and list all of your bills. Start with the smallest balance and work your way down to the largest balance. You now have a master list to work by. Now, decide on what amount you can budget each month for paying off your debt.

Whether it is $400, $500, or more, you must stick to this amount each month. Having a budget is going to help you in your quest to get out of debt and stay out!

Every month, you will need to unfailingly pay the minimum amount due on each of these balances. Then, figure out how much extra out of your monthly budget that you can apply towards paying off the smallest debt that you have on your list. That’s right – the smallest one. You are going to work towards paying as much as you are able to afford each month into this particular debt. Once it is paid off completely, you will begin to work towards paying off the next smallest debt on your list.

You will use the same payment amount that you did for the largest bill you just paid off, added to the minimum balance of this bill. You’ll continue this until THAT bill is paid off. Then, you simply repeat the process until all of your bills are paid in full.

You may choose to start with the debt that has the highest interest rate instead of your smallest debt. This is completely up to you, and depends on your own circumstances. The main idea of the debt snowball is to have a system in place that works like a well-oiled machine. Every month, without fail, you’ll be working toward a goal, and before you know it, you will be debt free!

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