How To Become Debt Free
Dave Ramsey is well known in the financial world for his disdain of credit cards and what he considers to be dumb debt. Chances are if you have heard of Dave Ramsey, you have probably also heard the term ‘debt snowball’.
People often credit this method with helping them eliminate huge amounts of debt – sometimes in the six figure range.
You might too be wondering if the debt snowball method can really help you eliminate your debt as well. The short answer is yes.
The debt snowball method is an excellent solution for paying down your debt and improving your finances.
What is the debt snowball method?
If you have been asking yourself ‘what exactly is the debt snowball method’ or ‘how can the debt snowball help me get my finances in order’, you have come to the right place. Simply stated, the debt snowball method is a motivational debt elimination plan.
With this method, you order all your debt from smallest to largest and begin attacking the smallest balance first.
This means gathering the balances from all your credit cards, personal loans, student loans, etc. and listing it in one place.
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Often times people use a notebook, excel, or a debt tracker to list out all their debts. This method really helps you get a complete picture of your financial situation.
You need to have a full understanding of what you owe to begin to confidently tackling your debt.
With the debt snowball method, you make the minimum payments on all your debts while also putting extra payments towards the smallest debt.
When you knock down the smallest balance, you then snowball that money towards your next smallest balance. Your process might look something like this:
Why does the debt snowball method work?
The debt snowball method works because it acts as a psychological boost. Each debt eliminated gives you a sense of accomplishment and is essentially ‘a win’.
The more wins you get, the more motivated you are to keep going strong in your debt pay off process.
The debt snowball method is also a great debt elimination plan because it helps you really focus on your finances.
Instead on stressing over attacking all your bills at once, you get ‘gazelle intense’ on one debt at a time.
Bottom Line
The debt snowball method is one of many strategies to help you take back control of your finances.
As you knock down smaller debt, the hope is that you will stay motivated until you are completely debt free.
However, personal finance is just that…personal. In order to eliminate your debt, you have to be crystal clear on your WHY. You also have to choose the approach that is best for you and your lifestyle.