When you are suffocating in consumer debt, you want to get out, and you want to get out fast. Whether you accumulated those balances quickly or slowly over time, the fact is you own that debt. Removing all the debt will take effort and dedication on your part, as well as time.
Snowball or Rollover Method
The idea is simple in theory yet takes dedication on your part to make this plan work. If you decide to utilize the "Snowball" method, you first chart all your debt -- credit cards, gas cards, phone cards -- into a neat chart. The bottom line may shock you. You want to chart the amounts you can afford for each bill, whether they are the minimum payment or not, and meticulously make sure you pay that amount, on time, each month, to avoid late fees and increases in interest rates. Pick a balance to pay off. David Ramsey, noted debt counselor, suggests paying off the smallest balances first, strictly for psychological reasons. Others recommend tackling the bills with the highest interest rates. Whichever tactic you choose, pay that bill down and apply the money you were spending on that account to the next on your list while you continue paying the minimum you can afford on the others. The idea is your debt payments will "snowball" until you have rolled over the highest amount into the last bill standing.
Snowflake Method
If you can't afford an avalanche of debt repayment, then you might want to try the "snowflake" approach. This method relies on the same idea as "snowballing" with a variation. When you have charted all of your bills, pay the minimum on each, and then chose a bill to pay a little extra on every month. Maybe you brought your lunch each day to work in a given week. Take the $20 or so that you saved and apply it to a bill. Do that each time you save something during a week or day? It could be $5 or $10, it doesn't matter. The extra money you are paying on the principal will work toward not only paying off the amount but preventing interest from accruing. The "snowflake" approach is a breeze if you utilize online banking since you can make electronic payments quickly, "rewarding" yourself by paying off debt when you save each day, week or month.
Stop Consolidating
You might have heard many times to seek out the best interest rate possible on your credit card or department store debt. This is true. If you can get out of a 25 percent APR credit card and into a 12 percent APR card, then you will save money in the long run by consolidating those debts in a low-interest loan or by transferring money into another credit card account. However, moving money around as you seek out better resting places does nothing to eliminate your debt. In fact, if you have not changed your spending habits, you might be tempted to use the high-interest credit card with the zero balance you just cleared to buy something that you "must have right now." While consolidating debt is a good way to save money, especially if you can reduce your monthly payment and lifetime debt, to truly eliminate the debt you'll need to rollover the savings that are you making into the new debt consolidation plan, rather than spending the savings piling up more debt. The key to eliminate debt, completely and permanently, is not only moving around money to the best holding account, but to eliminate the pattern of spending and change your spending habits forever.
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