Part Four: Push the Snowball

What is a snowball?

Starting a snowball is a method over paying off debts. Starting small leads to big payoffs as the debt reduction snowball rolls down hill… growing bigger as each debt is paid off. It is the process of paying the minimum plus a little extra each month on one of your debts while paying only the minimums on all the rest. Once the first debt is paid off, the entire amount that you were paying on that debt -the minimum plus the extra- is added to the minimum on the second debt. In this manner all of your debts will get paid off, faster and faster, as the snowball of debt reduction rolls down hill.

How to apply the snowball?

The steps in to create a debt reduction snowball are very simple.

First:

List out all of your debts, the total owed, and the minimum required payment.

Second:

Place them in the order you want to pay them off. Some people advocate listing them highest interest rate first. Others say order them lowest amount owed first. I personally advocate the later. While it is true that the former method will save some money overall, starting with the lowest debts first will get individual debts paid off quicker. The victories you win by paying off debts is worth spending a couple of extra dollars in my opinion. Exspecily in the beginning when you are first trying to get out of debt. A victory builds confidence and motivation to continue.

Third:

Decide how much extra you can add to your payment to get your snowball rolling. Even $10 will get the ball rolling.

Fourth:

Automate the payments so that you can free up your mind to think of other things and remain confident that each month you are digging your way out of debt as the snowball begins to gain momentum.

Life from here on. 

You have made it this far. Its time to reaffirm your commitment to being debt free. You have a difficult road ahead of you now. Don’t fear! The road has been traveled before. It is rocky, but you can do it.