Rock Your Debt

Do you find yourself under a mountain of debt?  Are you now trying to figure out how to get out and on top of that find the best way to get out of debt?  There are several ways to go about easing the burden but the best way is to use the debt snowball plan for repayment in order to get out of debt.

The debt snowball method, made famous by Dave Ramsey, is simply identifying all your debts, lining them up from the smallest balance to the largest regardless of interest rate and regardless of loan type – whether credit card loans or mortgage loans. Line them up smallest balance to largest. Any extra money that you can find needs to be put on the smallest balance with the minimum payment being applied to the rest of the debt balances.  Once the smallest debt is paid off, then you take that money and apply it to the next debt in line. This has a compounding effect as you’ll begin to gain psychological momentum with each debt you payoff. You will feel good about the sacrifices you are making. In addition, the amount of money being applied to the balances grows with each payoff!

This type of repayment plan has been greatly debated by countless financial gurus.  Some say that it is not the best method because it doesn’t take into account the interest rate.  So, therefore, your money is not being used to maximum impact.

The thing to keep in mind is that this is a psychological plan not a mathematical one.  You will feel immediate success from your first debt payoff and be more likely to carry that momentum on to your next debt. Also, if everyone was concerned about the mathematical side of finance then they would realize that getting into consumer debt does not make sense from the math perspective – which makes this plan the most effective. In fact, you probably got into debt not thinking too much about the interest rate.

Getting out of debt does take work, focus and sacrifice.  It is not easy.  You may need to change a few habits in order to find extra money.  You might have to cut your cable bill or stop eating out but it is all worth it. Keep in mind that this is a short term solution with long term effects. There is nothing magical or earth shattering about this method but if applied properly the debt snowball strategy is the absolute best way to get out of debt.

You also may be interested in:

1. One Debt Elimination Strategy to Rule Them All