One of the best ways to eliminate debt is through what is known as the “Debt Snowball.”
What is a “Debt Snowball”?
The debt snowball is a method of paying off debt in a manner that accelerates and allows you to pay larger and larger debts without additional financial burden as time goes on. Here’s how it works…
First, do an inventory of all or your payments – amounts of the debt and amounts of your monthly payments. Then choose the one with the lowest amount of debt and apply everything you can do to paying it off first. Then, take they money you were paying on that debt and add it to what you are paying on the next lowest debt. Keep paying on it until it, too, is paid off. Then add the money you were paying on the first two to what you are paying on the third lowest debt.
You can see how that as you pay off each of the lower debts the amount you can apply to the next on is increasing – it is snowballing! Continue in the same way until all your debts have been eliminated using this “Debt Snowball” method.
The snowball method may seem too simple, but it has been shown to be one of the most effective strategies available for reducing and eliminating debt.
For more information about eliminating debt, see the list of articles on the left side of this page. One article that you may find particularly interesting is Getting Out Of Debt! The Harsh Realities.