There are so many ways and techniques discussed out there about how you can pay off your debt. From budgeting techniques to debt consolidations but, what is really the best way for you to pay of your debt? Let’s get into the Debt Snowball Method and see if it will work for you.
What is the Snowball method?
The debt snowball method is a reduction strategy where you pay off your debt in order of smallest to largest. Gaining financial freedom as you knock out each balance.
Think of it in the same way as a snowball rolling down a mountain. As it rolls down it collects more snow, growing larger and larger. When you pay off your deb
The Debt Snowball Method can help you minimize your debt without having to sacrifice your lifestyle or the little things you enjoy doing.
Debt can be such a stressful thing to manage, it can make you overly worried and you will forget to enjoy the little things in life without having the constant stress of debt on your mind.
The Debt Snowball Method also teaches you to work smartly with your money, it teaches you to budget and spend wisely.
It also teaches you to not be afraid of your debt commitments, it’s showing you an effective way to become financially free and how to have a clear plan to managing and paying your debt without stressing about it.
When the smallest debt is paid in full, you roll the money you were paying on that debt into the next smallest balance and so the cycle continues…
Where to get started?
- Gather all your debt like credit cards, personal loans and items you purchased on credit. Excluding assets like your House bond.
- Make a list and organize your debt from smallest to largest. Start organizing it from the lowest amount owed to the largest amount owed.
- Continue making the minimum payment on all other debt besides the smallest debt
- Put all your extra money towards the small debt payments
- When the small debt payment is completed tick that off your list and move on to the next
- Repeat these steps until you are debt FREE.
How does the Debt Snowball method work?
Here’s an Example of the Debt Snowball method and how to use this method
Say you have four debts:
R500 medical bill—R50 payment
R2,500 credit card debt—R63 payment
R7,000 car loan—R135 payment
R10,000 student loan—R96 payment
Using the debt snowball method, you would make minimum payments on everything except the medical bill.
But let’s say you have an extra R500 each month because you took a side job and cut your expenses down to the bare minimum.
Since you’re paying R550 a month on the medical bill (the R50 payment plus the extra R500), that debt will be gone in one month.
Then, you can take the freed-up R550 and attack the credit card debt, paying a total of R613 (R550 plus the R63 minimum payment).
In about four months, you’ll wave goodbye to that credit card. You’ve paid it off!
Now, punch that car loan in the face to the tune of R748 a month. In 10 months, it’ll drive off into the sunset.
Now you’ve got the swing of things!
By the time you reach the student loan, which is your biggest debt.
You can put R844 a month toward it. That means it will only last about 12 months.
After that, you’ve again control of your finances and have financial freedom!
Thanks to your hard work and sacrifice, you have paid off R20, 000 of debt in only 27 months using the Snow ball method, Amazing right?! !
GOODBYE DEBT and HELLO FINANCIAL FREEDOM
Why Does the Debt Snowball Method Work?
The snowball method works because it’s all about behavior modification, not math. When it all boils down, your habits has more to do with this equation than math ever will.
Your Debt doesn’t have to be daunting. You just have to work smarter with managing your debt, it can be paid off with no stress and no pressure if you work smartly with it.
Learning to balance out your finance will do you wonders, start small and eventually you’ll end up with absolutely no debt, giving you a fresh financial start to learning to work better with you finances.
It’s like Darren says: “The problem with your money is not your math. It’s the person in the mirror.”
That’s right. Winning with money is 80% behavior and only 20% head knowledge. If you can get that person to change their habits, there’s no stopping you from gaining financial freedom.
Still unsure about the debt Snowball method?
Here’s a few typically asked questions that we are answering for you!
- Why pay the smallest debt first, instead of the one with the highest interest rate? …
Since the debt Debt Snowball Method is based around behavior modifications, paying off the largest amount first might discourage you from paying the rest of your debt.
- How do I know when to sell something or pay it off?
If it will take you more than 18–24 months to be debt-free on an item, sell it. The impact of freeing up that monthly payment, plus not owing a huge balance, will rock your world.
- Should I keep saving for retirement while in payment 2?
No. You want to commit all your energy and resources to getting out of debt while in payment 2, don’t dilute your efforts; concentrate on one thing at a time.
- What if I get laid off while paying off?
That’s scary to think about, but if you lose your job, go into survival mode! Bring your lifestyle back to the basics, stick to making your minimum payments only continue with the debt snowball method once you have secured a new job, but in the meantime get ANY JOB is better than NO JOB! Get a job as a pizza delivery guy or something to do that will still bring you in an income.
If you get severance pay, don’t kick back and relax by living off of that. Try not to even touch it! Live with the basics and hunt like crazy for new job. The sooner you get a new job, the sooner that severance pay will look like a huge bonus that you can apply toward the debt snowball.
The debt snowball method can be your finical bestie and lead you to financial freedom, if you are willing to stick to your payment plan, this method won’t only help you slash your debt but it will also make you feel good and accomplished for repaying your debt and becoming financially free
Still unsure that the debt snowball method is for you? And are you afraid that you might not manage?
Request a Free Debt assessment and we can help you evaluate your debt situation and advise you on the best solution to reduce and pay off your debt in the fastest possible time.