Get Considerable Debt Relief Using The Debt Snowball

July 31, 2009 by  
Filed under Debt

The term “debt snowball” is used to describe effectively managing your debts by yourself regardless of the amount your currently owe using a debt management plan. No matter what your situation is, you can start doing something about your debt problem.

Most people have accrued their debts over a long period of time, the fact is it is not going to be cleared in a matter of weeks, the debt will take time to clear off – but it will be done. It is simply a matter of taking stock of your situation and being aware that a strategy must be implemented that you can realistically maintain.

Firstly, destroy your credit cards. To begin eliminating your debts, you must stop adding to them. Do your sums and find out how much you can afford to put towards your debts. What do you spend money on that can be cut back on without getting into further debt? Obviously, you will have your bare minimum with rent/mortgage payments, food and utility bills.

At this point in your life, luxuries need to be reduced. Do you have a membership for the gym, or other leisure centre. Get a work-out by going for a brisk walk every day. What about buying food and drinks when you are out? Buying food on the go can be extremely costly, it is easy to think about it as only a few dollars here and there but at the end of the month you could pay a large bill with the cash.

Ok, so you have cut back on unnecessary spending using your income for only the bare essentials. This should also allow you to pay the minimum payment on your debts per month. Take the residual cash and put it in a savings account or towards existing savings.

To put the debt snowball strategy into effect, you will need savings of at least $500 for one person. Now, these savings cannot be used for everyday bills, it is strictly for unforeseen costs only such as fixing a boiler, plumbing or your vehicle.

After you have successfully saved this amount (or already it have it) you can begin. Construct a list with every debt that you have, starting with the smallest sum and finishing with the largest, remember to include absolutely everything.

The next thing to do is put the money you were previously putting towards your savings and begin paying off the list. Because the first few entries on your list will be smaller sums, you will be able to get rid of a good few debts immediately. This will give you the encouragement that you need to carry on paying those debts.

It may be tempting to put your cash towards the debts with the most interest. Although theoretically, this would save you a little more, we are only talking a small amount and at this point we are looking to for motivation which will be achieved when you begin seeing your list diminish.

The whole point of the debt snowball, is to keep going bit by bit, constantly paying off your debts. It may be a slow process but everyday you will have paid off that little bit more making the end nearer in sight.

For optimum encouragement, you can treat yourself with a small luxury after a debt has been paid. If you have a family, you can put it towards a cheap and cheerful family outing or for you and your partner.

Once you are in full flow, you will notice a feeling of relaxation. People often do not realize what debt problems do to the body with the stress and anxiety it brings. You may not be going on expensive holidays or buying a new car at the moment, but the feeling of relief which comes with debt solutions gives far more happiness than retail therapy ever could.