The most important thing when beginning a Debt Snowball plan is to gain momentum by paying off your first debt as quickly as possible. While logically it makes sense to pay off the credit card or other debt with a higher interest rate first, this usually leads to failure on the road to get out of debt. Why?
You and I are emotional creatures - especially when it comes to money! Again, logic says (and we've all been taught) that high interest rates are to be avoided at all costs. Do I agree? Sure, and it would be silly to suggest otherwise.
However, if you do your Debt Snowball plan right and manage your debt payoffs correctly, the smartest thing to do might be to focus on paying down a lower interest rate debt while making only minimum payments on higher interest rate debts.
Before you write me off as crazy, read a little further...
When you pay off the smallest balance first (again, let's say it is the lowest interest rate), that will free up the money you used to pay toward that debt to be paid toward the next debt on the list. The faster you can start paying down extra principal on your second debt, the faster that gets paid off and the faster that you can apply extra money from debts 1 and 2 toward debt 3. Starting to make a little more sense, right?
But even more importantly, that will give you a much needed sense of accomplishment that will fuel your efforts to continue to pay off your debts and stick with the plan. This seemingly small act will set off a chain of events, much like a snowball being pushed down a steep hill (hmm, now you know where 'Debt Snowball' comes from, right?)
As the Debt Snowball gains momentum, it accumulates more snow/money. As you begin paying off smaller debts, you will see real success and gain confidence in your ability to finally break free of your debt shackles.
After all, would you rather do it the 'logical' way, maybe starting on the payoff of a high 19% interest rate credit card with a $10,000 balance that will take years and years to pay off before you see ANY additional debt snowball start to build?
Or would you rather focus on your 6% auto loan that only has a $2,000 balance left and try to get it paid off as soon as possible? If you focus on the auto loan, you get a big victory much sooner, and those hundreds of dollars freed up from your paid-off auto loan go directly to the Debt Snowball that will help wipe out the $10,000 credit card balance much faster.
Once the credit card is paid off, your Debt Snowball grows again, and substantially. Then it crushes the third debt on the list, and by the time it gets to, say, a large student loan and then your mortgage, you are paying so much extra that even the large debts drop quickly.
I tell you - there isn't much in life that feels better than taking your life back from the banks and credit card companies, something that most of us never thought was possible.
If I didn't convince you not to pay off your highest interest rate debt first, that is okay too. I'm okay with losing that battle as long as I can convince you to stick with it and win the war. Just promise me that you'll stick with the debt snowball system and not give up. The Debt Snowball is just math and numbers and a system to follow. Do it.
Author Resource:-
Many people don't start saving for retirement because it seems so difficult, or they think they have lots of time and they don't need to worry about it yet. Don't get caught not having enough to get by, Get rid of your debt fast with www.MeltDebt.com
![[Valid RSS feed]](http://www.freebie-articles.com/images/rss.gif "XML Feed For RSS")
Category Rss Feed
Print This Article
Add To Favorites