Snowballing for Dollars

Winter is right around the corner. Whether it snows in your region or not, snowballing out of debt is one of the most popular strategies of digging ourselves out of the financial hole. It’s very simple to understand, and very clear cut to do. It does take discipline and, probably most of all, patience. Keeping your eye on the prize here is the key.

The debt snowball is the ultimate step in paying off your debt. First, you need to list all your debts. List everything! Do not leave the loan to Mom and Dad out. Include it so that you have a true picture of your debt amount. You want to make note of the zero interest loans to the highest interest loans. Then, redo the list with the smallest debt at the top and biggest debt at the bottom.

The only time to put a very high debt at the top is if this debt threatens the roof over your head. For example, if the IRS is threatening to take your property, you will want to get that worked out. Now, focus on the smallest debt first, and be diligent in paying this debt off. Do this while making sure all other payments are being made and kept current.

Once you pay off this small debt, look to the next small debt on the list. The money that has been freed up from the previous debt that has just been paid is applied to this next small debt. Are you seeing how this can work? Meanwhile, as you get caught up and excited about coming out of debt, look to see if you can “find” more money in your budget to apply to this debt. How about brown bagging lunch 3 days a week with the challenge of working up to 5 days a week? Buy a thermos and take fresh coffee made at home to enjoy on your way to work.

When the number 2 bill is paid, apply the same steps toward the number 3 bill. You will be amazed at the money freed up to pay this bill! Remember to keep paying the minimums on the other bills to keep them current. Are things beginning to feel pretty good? Do an attitude check. How do you feel about this debt digging now? Oh, and go ahead and dream. Where would you like to vacation this year? It’s not too soon to plan a vacation with the “freed” money you have now!