You just got fired from your job, your wife is pregnant with a baby, your son broke his leg, and to top it all off, your daughter stole your credit card and is on a wild spending spree. Just one of these things could be enough to get you into a great deal of debt.
Debt snowballing is a sure-fire way to get out of your debts. It doesn’t use negotiating tricks or won’t cut any amount off of it, but it’s a simple system you can use to acquire debt relief.
The first step is making a list off all your income, expenses and debts. You list your whole family’s income, so that includes your husband, wife, son, daughter or even the dog, if its making money. You only list the expenses that are absolutely crucial. That means expenses like gas and electricity, not fine dining and new expensive clothing. Last you sort your debts from small to big. Don’t forget to also list the interest rates and monthly minimum payment along with your debts. This will make the scope of the problem very clear, and you can start to making a plan.
Now it’s time to do some math. Add up all the income you have and subtract the combined expenses and monthly minimum payments. This will hopefully leave you with a surplus.
If it doesn’t leave you with a surplus, go over your expenses again, and make sure there’s nothing you could do without. If there isn’t, then you might have to look into getting a debt consolidation loan. This will lower the monthly minimum payments, but you will pay more money overall.
If you do have a surplus, don’t think you can keep this money and do nice things with it. No, you’re keeping yourself on a strict budget. You use the surplus to pay off more of the smallest debt you have than its minimum. This will increase the speed in which you pay it off. For example, say the monthly minimum payment is $100, and your surplus is $200, then you pay off your smallest debt three times as fast. It will be cleared in no time!
After you have paid off your smallest debt, your surplus will grow by $100. Now you have $300 in your surplus, which you will use to pay off your second smallest debt. Say this debt also has a minimum payment of $100. You’re now paying it off 4 times as fast!
You simply continue this strategy until you have paid off all your debts. With every paid off debt you gain momentum. This is the fastest way to clear debt, without resorting to settlement tactics.
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