How to Pay Off Debt with the Debt Snowball
- 1). To pay off debt with the debt snowball, order your debts from smallest to largest. You must consider interest rates when you order these because a $1,000 debt with 12 months same as cash is not as toxic to your bank accounts or credit as a credit card with $500 on it at a 23 percent interest rate. To order them, calculate the total amount you will pay on each bill at the end of a full year to get the true totals. To pay off debt using the debt snowball, this is how you organize your paperwork.
- 2). After you have organized your debts in order from smallest to largest, the second step to pay off debt using the debt snowball is to separate the debts into bills that must be paid off immediately and debts that can take longer, but are usually bigger. Some sacrifices may have to be made in the short term to pay off the longer term debts. See if there's anything you can go without, like cable or the monthly pay Bowflex so you can see how much money you have to put toward the long-term debts. You'll be better off in the long run. To pay off debts with the debt snowball, you can't start the snowball behind the eight ball. Some sacrifice may be necessary.
- 3). After you separate your two piles, the final step to pay debt off with the debt snowball is to put all monies toward the smallest debt and pay it off as quickly as possible. This is the equivalent of the snowball rolling down the hill. It starts small and gains speed as it continues. The small bills and debts give you just as much worry and if you can get that worry off, then you can better focus and keep motivated to pay off big bills. Saving, like spending, is a slippery slope. So, to pay off debt using the debt snowball, knock out bills and debts smallest to largest and stay motivated.
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