The somewhat unusual sounding ‘debt snowball’ strategy is a method many chronically indebted person use as a means to help reduce their overall debt burden over an extended period of time. This method is not all that difficult to master one you are able to understand it completely.
Basically, the system works only is that if you have more than one credit card debt. In that case, you are required to pay off the smallest debts first while making only minimum payments of the larger debts irrespective of how large they are.
Once the smallest debts have been completely eliminated, you may than move on to the next smaller one while following the same concept of paying more for the smaller debts and keeping away your imminent and approaching solvency by making minimum payments of the larger debts, overall.
If you work at it for enough time, then slowly all your smaller debts will be eliminated one by one. you may subsequently increase the payment amounts of your larger debts rather than continue to pay the minimum amounts you were making before to your credit card service providers. Eventually, your larger credit card debts would also be paid too and you would be finally able to live a debt free life once again. And breathe the air of freedom again.
· How it works
The ‘Debt Snowball’ method aims to get rid of smaller debts first even if they are charging low interest rates and encourages you to make only minimum payments of even high interest loans regardless of how high their interest rates may well be.
According to this technique, the money that you earn every month will be essentially utilized to pay off the smallest debts first (However, you have to make sure that it does not affect your basic living expenses because, if you were to do so you might end up being forced to take even more loans effectively continuing the whole cycle) while the minimum dues on your other loans are paid irrespective of the fact that their interest rates are steadily increasing and you may in essence have to end up paying ‘interest on interest.’
However, if you have two or more credit card loans whose payables are roughly equal, then many credit people advise paying off the one whose interest rates are higher.
There are some key factors to take into ‘account’ (pun intended) while attempting to create the proverbial ‘Debt Snowball’
1. Stop spending beyond your means!
This is the most basic step of all. You can’t really expect to live a debt free life if you continue to use your credit cards to spend money that you don’t have, even while you are doubtless well aware of the fact that this is the single most important factor that is responsible for putting you into debt in the first place!
2. Be myopic
Most people who have successfully rid themselves of debt by using the debt snowball approach also advise you to acquire ‘tunnel vision’ instead of trying to pay off all your bills simultaneously. When it comes to credit card bills, focus on only one bill at one time only and then start on another one only after the first one has been completely paid off.
3. Don’t stop at the very first pay off
Once a bill has been paid off successfully, rather than using the money freed to buy non-essentials such as the latest model LED TV, here, it is advisable to continue to utilise that sum to pay off the next bill. This process has to continue without a break till ‘all’ your debts have been paid off and you can now enjoy a completely debt free life and live and breathe the air of freedom again.
