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Step 1
Gather every account that you currently owe money on. If you’re not sure how many accounts you are in debt to, you can certainly find out on www.myfico.com by purchasing your credit report.
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Step 2
In a separate spreadsheet (or notebook paper) arrange your accounts according to debt amount. Be sure to include the interest rate that is attached to your balance.
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Step 3
Next, you will create a monthly or bi-weekly budget and payment schedule for your debt.
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Step 4
The “snowball” effect works by making the minimum payment on all of your accounts except for the last one which should also be the account with the smallest balance. The last account is the account that you are going to pay as much as you can afford until the account is paid in full.
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Step 5
Next, you move to the account that was the second smallest and apply the same method until all accounts have been paid in full.
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Step 6
The “snowball” technique is very effective and will help you eliminate debt in an efficient manner. The key is to avoid adding any new debt at all costs! Also, if one of your accounts is carrying an unusually high interest rate, it’s ok to pay that one off first. Otherwise, proceed with making the largest payment possible on the accounts with the smallest balance. Eliminate debt one account at a time. You can do it as long as you stay focused on the plan and be consistent with your spending habits.
Comments
cygnetbrown said
on 4/7/2009 Thanks for the great article!
gerrie5044 said
on 3/31/2009 Great advice! 5* and rec
MotherDove said
on 3/26/2009 Hey, lots of people offer advice on how to eliminate debt but I think you might be on to something here! This is a practical and effective plan. Thanks so much for the snowball method!
sewcraftful said
on 3/26/2009 LOVE THIS! Solid advice and well thought out. Straight up information.
lmccray4 said
on 3/7/2009 Good idea 5* and a recommendation