• Debt Settlement
• Debt Consolidation
• Bankruptcy
• Credit Cards
• Budgeting
• The Debt Settlement Process
• Debt Related Definitions

Starving for fun and profit

If you are burdened with debt, the worst thing that you can do is just pay your minimum payments every month and just hope that eventually things will work out.  That won’t just keep you in debt a lot longer, it will also result you paying thousands more than you have to in interest.  If you truly want to get out of debt, you need a plan.   And one of the most effective plans that debtors can use to get out of debt is the “snowball method.”

Here is how to slowly build up a lot of money towards paying your debt.

List Your Debts-  Make a list of all your debts in order from lowest balance to the highest.  For most people, a low balance credit card usually going to be at the top and their mortgage is usually going to be at the bottom.

Calculate Your Minimum Payments -  Your next step is to figure out what you have to pay at a minimum to keep your creditor happy and keep your credit score from dropping.

Determine How Much Extra You Can Pay -  In addition to the minimum, figure out how much more of your income you are able to spend on paying off your debts.  And try to be honest with yourself on this number.  Try and look at other unnecessary expenses that you can cut out to increase the amount you can pour into your debt, like unused gym memberships or a cell phone plan that has more minutes than what you actually use.  If you can cut out eating out every month, do that too and add the cash you save to the money you pay towards your debt. Every little way that you can slash your expenses now will greatly help your financial future.

Start Paying the SMALLEST Debt First -  This “extra” money that you can pour into your debt should first go towards your smallest balance, in addition the minimum monthly payment.  For most people, this means that you smallest debt will be payed off relatively quickly.

Move on the Next Smallest – After your smallest debt is payed off, begin paying off your second smallest debts. To determine the amount you pay, add up the minimum payment of your smallest debt, the minimum payment of your next smallest, plus the “extra” you were paying before.  So say the minimum on your previous smallest was $20, the minimum on your next smallest is $30, and your “extra” is $100, you now start paying $150 dollars towards what is currently your smallest debt.

Continue Until Debt Free-  You keep doing this, adding up the amount you pay to your smallest debts until it “snowballs” into a larger and larger amount. By the time you get the end of the line, not only are your debts freed up, you have a lot of leftover money each month that you can pour into savings.

The genius of the snowball method is that it doesn’t just address the financial element of getting out of debt.  It also addresses the emotional aspect of debt relief.  By paying off the smallest debt quickly, you get the almost instant gratification of being relieved of debt, which encourages you to keep pressing forward with your debt relief strategy.