How to Eliminate Debt Using The Debt Snowball Method

This article will describe what a debt snowball is and how you can use it to get out of debt for good.

Instructions

1

First you should accumulate a $1,000 emergency fund. You may be thinking to yourself shouldn't I be paying this money towards my current debt, and the answer is no. You need to have some money set aside to protect yourself if something unexpected should arise. That way you're protected from having to go further in debt. Now, needing a flat screen tv because the Super Bowl is coming up does not constitute an emergency. The most important part of being able to get out of debt is having self control. There's no way you'll ever get out of debt if you can't control your spending.

2

Next, you need to make a list of all your current debts in order from smallest payoff to largest. It wouldn't hurt to put the interest rates on each of those debts on the list also. Some people say you should pay off the debt with the highest interest rate first, but Dave Ramsey says to pay off the smallest debt first. I personally look at both aspects and make the best decision for me. Ramsey says "paying the little debts off first gives you quick feedback, and you are more likely to stay with the plan". If you have trouble committing to things, then definitely follow his advice.

3

Once you've created your list and decided which debt you want to tackle, start throwing any extra money you can to get that debt paid off as quickly as possible. You may want to take on a second job until you get your debt under control. If you don't have time for a second job, look around the house and see if there's anything you could sell. We all have things around the house that are just collecting dust, why not sell them and let them collect dust in someone else's house. Also during this time try your best to cut back your spending on any unnecessary things like new clothes and fast food.

4

Once you pay off the first debt, take the extra money you now have available and start paying on the next debt on the list. Just keep repeating this process until all your debts are eliminated. If you will stick to this plan, you'll be surprised at how fast you can get out of debt.