Debt Snowball - A Proven Strategy for Paying Off Debt FAST!

By Anna D. Banks

A Proven Strategy for Paying Off Debt FAST!

The Debt Snowball is the most talked about strategy for paying off debt fast. That's because it works. It's recommended by recognized financial expert Dave Ramsey and other financial gurus.

How the Debt Snowball Works

List all of your debts, in descending order by balance, regardless of the interest rate (accounts with smallest balance first).

Determine the most money you can make available from your budget to apply to the debt snowball. The more you can apply, the more money you'll save and the faster you'll pay off your debt.

Each month, apply the minimum payment PLUS the extra money you've made available from your budget to the first debt (the one with the smallest balance). On all your other debts, pay only the minimum payment. Continue to do this until the first debt on the list is paid off.

Take the minimum payment AND the extra payment you were making on the first debt and add them to the minimum payment you've been paying on the second debt. Pay that amount on the second debt each month until it's paid off, then move on to the third debt. Continue to pay only the minimum payment on all debts except the one you're "snowballing."

Repeat this process until all of the debts are paid off.

It will not take long before the payment you're making on the targeted debt becomes quite large, as you add the payments you were making to all the other accounts (that you've now paid off) to the payment on the debt you're now focusing on. Your cash flow remains the same throughout the process but the monthly payment you make to the targeted debt grows larger and larger.

Several Web sites provide online Snowball calculators so you can see for yourself how the Snowball would work for you. The Snowball Calculator allows you to enter up to 20 debts and will show you which debts to pay off first, and the amount of the payments. The Debt Snowball Calculator allows you to order your debt in several different ways to see you much you'd save under each method.

Many people have raved as to how well the Debt Snowball works. It just takes commitment to being debt free. As Dave Ramsey says, "if you can live like no one else, later, you can live like no one else!"