Debt snowballing

Debt snowballing is basically a debt repayment payment that was developed by Dave Ramsey, a radio talk show host and financial expert. This method is most suited for sorting debts revolving around credit cards. Let us take a quick look at some of the steps that help in snowballing debts. You need a calculator and you have to maintain a worksheet to see that everything works out according to your plan.

• To begin with, make a list of all your debts in lowest to highest order. This way you can understand what has to be tackled first. The debt snowballing method works on the concept of resolving the lowest debts first. All you have to do is calculate the total amount against each debt and put them in ascending order.
  
  
• If there are two debts that are equal in amount, then take the interest rate and prioritize accordingly. Though you may feel it is a better idea to start with the largest debt, it is actually the smaller debts that should be cleared off first. 
  
  
• Next, focus on paying out the minimum payment amount of all your debts. One of the advantages of debt snowballing is that it allows your good credit rating to be maintained. The basic goal of debt snowballing is to make you debt free, and it does so by letting you concentrate on one step at a time. This way, over a certain time period you can meet all your financial obligations. You might find this method slow but it is quite steady and effective.
  
  
• Only after you finish resolving one debt, you should proceed to the next. The process should be repeated till you get to your largest debt. Though it takes time and discipline, in the long run debt snowballing does work.
  
  
• You have to be very consistent in paying all your bills in time, otherwise the method of debt snowballing will just not work. If late fees enter the picture, then your minimum payment amount will only grow larger. As a result you will not see any improvement in your debt snowball worksheet.

The most important thing here is to maintain a worksheet that has an account of all your debts, payment amount, payment deadline etc. You will be free of debts on credit cards if you work around your debt snowball worksheet honestly and diligently. And most importantly, don’t give up because you think it is taking too long!