Debt is a beast that can take over your life if you don’t get it under control.
There are many ways to pay off debt. If you’ve never looked into the snowball method. made popular by Dave Ramsey , you may want to use this technique to pay off debt and minimize the amount of interest you pay every month.
Use these steps to help you get started:
1. Have a Working Budget
To effectively pay down your debt, you need to know how much money you have coming in and going out every month. Your budget must be complete and include all of your monthly payments, as well as the money you spend on food, gas, fun, and other expenditures.
2. Create a Full List of Your Debts
This may be the hardest step of the snowball method, since it requires you to look your debt in the face. Remember, once you finish this step, you’re a little bit closer to getting your debt paid off! Create a list of all of your debts, including the company to whom you owe the money and the amount you owe.
3. Order Your Debts
Order your debts from highest owed to lowest. This determines in which order you will pay off your debts and take back control of your finances. You will be paying lowest debt off first. This is a great way of doing this since the smallest debt is the most attainable, getting to cross of the list keeps you motivated.
Also Read: Top 10 Habits of Frugal People
4. Start Paying!
Now you can get down to business. Each month, you will make the minimum monthly payment on each of your debts. However, you will take all of your extra money and apply it to the first debt (the smallest one) on your list. Continue until that debt is paid. Now, take that monthly payment and add it to the payment of the second debt on the list. Continue until you have no debt!
This method is surprisingly easy and effective if you can stick to it. Getting out of debt requires dedication and hard work, but it’s all worth it once you’re debt-free.
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