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Debt Snowball

You can wander into debt, but you can't wander out.

With all those payments going out each month, there's nothing left for you. To get out of debt, you've got to change your habits. Create margin. Earn extra income. Live on rice and beans.  You can be debt-free. We'll show you how.

How the Debt Snowball Works:

Get the ball rolling and attack your debt!

  • List your debts in order from smallest "total payoff" balance to the largest.

    Don't worry about the interest rate, unless two of the debts have a similar payoff balance. In that case, pay off the one with the highest interest rate first.

  • Attack debt by paying as much as you can on your smallest payoff balance. You need quick wins.

    Only make minimum payments on all the other debts and put everything you can into the first debt. When you knock one out, cross it off. This will show you how close you are to becoming debt-free and keep you fired up!

  • Once you've paid something off, move that entire payment to the next item on the list.  As the payments roll over, watch how fast your payoffs grow. You can be out of debt sooner than you think.

The point of the debt snowball is behavior modification.  If you were to start paying on the largest loan first because it has the highest interest rate, you won’t see it leave for a while.

Pretty soon, you’ll lose steam and stop paying extra, but you’ll still have all your debts hanging around.

When you ditch the small debt first, you see progress. That small, nagging debt is out of your life forever—and you begin winning! By the time you’re paying the bigger debts, you have so much more cash freed up from paying off the earlier debts that it creates a snowball effect. You are putting hundreds of dollars a month toward your bills instead of a few bucks here and there.

The point is this: When you see your plan actually working—your snowball actually growing and gaining momentum—you’ll stick to it. And by sticking to it, you’ll eventually succeed in becoming debt-free and staying that way.

by Dave Ramsey