How many ways can you skin a cat? Actually, I don’t know any. But I do know that eliminating debt comes in many flavors. I also know that a one-size-fits-all approach rarely works in the world of personal finance. If you are looking for something simple and easy to follow, snowballing may be the answer.
This has nothing to do with a ski slope in Vail, unless your Freedom Party includes sipping hot cocoa after hitting the powder (my dream), and everything to do with eliminating pesky debt from your life. Wandering into debt may be effortless. Getting out will require persistence, intentionality and a plan. You bring the first two.
I was a babe in the get-my-life-together phase when I stumbled across Dave Ramsey. He passed this along to me and I’ll re-gift to you. First, create a household budget. Next, a simple, fool-proof method of dumping debt includes the following:
- First, figure out how much you owe and to whom the dollars should be directed! I take nothing for granted in this business. We are concerned with all active, non-mortgage payments. I’ll address bad debts in a separate post.
- Next, arrange your debts in order from smallest to largest. It helps to write these down in some fashion (old school pen and paper is just fine).
- Then, pay the minimum on every bill EXCEPT the smallest. The idea is to retire the smallest debt with all the extra dollar power you can muster.
- Once you retire the smallest debt, do a happy dance! Then take everything you were sending to that smallest creditor to the next one on the list. Thus building your debt snowball.
- Rinse and repeat until all debt has been eliminated from your household budget.
I realize this is much easier said than done. However, get started and let the momentum of the debt snowball spur you on to success; one step at a time.
Where are you in the debt dumping process? If you’d like some help, join our Power of Community experiment.