Living in debt is no way to live
Many think that debt is just a way of life – nothing could be further from the truth. It is possible to become debt free, it just requires focus and dedication.
When considering how to conquer debt, many people don’t take any action beyond just considering it because it’s often overwhelming and most don’t know where to start.
The snowball method is very handy for people in this situation. It makes taking control of your debt simple with a plan that’s easy to stick to.
1. Stop using credit cards
The first step is to stop using your credit cards to purchase anything.
If you don’t have the cash to pay for it, do not buy it.
Avoid eating out and purchasing clothing items that are not necessary. Many people find that they can save around $50 per month just cutting out their daily coffee or soft drink habit. That additional $50 per month can put a major dent in your credit card balance.
2. Pay off the lowest balances first
Your next step is to look at all of your sources of debt and ask yourself which one you could pay off the quickest.
This is usually a credit card with a low balance. It’s recommended that you start with low balances and work up to the higher balances because the rewarding feeling you’ll get after paying off balances in full will keep you motivated to keep going.
For example: If you have a $10,000 car note balance with a $350 a month payment, a $5,000 student loan with a $150 payment, a $1,000 credit card balance with a $50 payment, and a $500 department store credit card balance with a $25 payment — you will start with the department store card and work your way up.
Focus in on that one balance and that one balance only. Pay just the minimum payments on all of your other debts and use all of your extra cash to attack your first balance until it is zeroed out.
3. Let your efforts snowball
Now that you have that debt paid off, focus on the next balance.
Use the cash you were using to pay off the last debt and apply it to the next debt you’re focusing on, remembering not to add any debt to your other accounts.
You’ll find that if you set obtainable goals for yourself, such as applying the snowball method to pay off debt, you will stay motivated and focused. Soon, you will be living debt free.
Without all of your cash being tied up in payments, you will have the cash to pay in full for items you were used to financing – you’ll no longer have to throw your money away on interest and finance charges. You are debt free for life now.
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