Having a great plan to get rid of your debt is one thing. The transformation of the plan into execution is a whole new ballgame. Without a doubt, the best way to get out of this debt chain is called debt snowball. Here are the following key points through which debt snowball works:
- List all of your debts in proper order you’ll pay them off
- Pay at least the monthly minimum on all your debts
- Start paying off with the smallest debt
- Once you are get done with one debt, spare the minimum payment you were paying off and any additional money for your next debt
- Once you get done with the second debt, keep paying the minimum payments for the first two debts and also some extra cash for the third debt.
- Repeat this process until you are debt free
The method of debt snowball works efficiently because you pay more than just the monthly payments each month. The result of this activity is that you get out of debt faster and with less money paid in the interest. Structuring your debt snowball strategy can vary according to personal preferences. However, it is advisable to pay off the debt with the highest interest rate first. In this way you can save some of your money in interest and get you out of the debt in the fastest way possible.
Another option which is available for the debtors is to pay the debt amount from smallest to largest. This can help to in psychological boost. This will provide you a quick victory and helps you to remain on track. It is important to consider that all of these options are only seem practical if you have already saved some extra cash. However, if you living paycheck-to-paycheck and don’t have additional money to opt this strategy, there are some other ways which can help you in designing your debt snowball strategy.
- Lower your bills
Just before than hopping on your grocery bill, try to reduce your expenses on month-to-month & recurring bills. These include cable, television, electricity, phone and gas bills. This options results in monthly savings on these bills and you be able to generate enough amount to pay off your debt.
Start this activity by tracking all of your monthly bills and try to tackle one of your most expensive monthly bills. Plan on how to reduce the amount of this bill and saved amount can be thrown as the interest payments on your debt.
- Sell extra stuff
There are high chances that you got some extra stuff in your home which you don’t need or want. Instead of letting it collect dust, it would be better if you can sell that. There are various online portals available where you can sell stuff easily without even costing a single penny. Hence, it is another effective way to generate some amount of money to pay of your debts.
- Start a side gig
There are so many options of working online and any other part-time jobs apart from your day job. This will result in generating some extra cash to pay off your debts. This strategy widely works for the debtors and produce extremely efficient results.
- Reduce your interest rates
This is one of the most over-looked debt management options. Most of the times, the lenders provide an opportunity to debtors to refinance their loans. Getting a better rate on your car loan or credit card can make a huge impact on your get-out-of-debt plan. By lowering the interest rates, your money is saved to balance your debt plan.
Most of the times, we are looking for miracles to happen through which we can just get rid of these loans. However, this is quite impractical approach towards debt management. It is okay and advisable to start small. Start saving from various unwanted expenses and at the end of the year or month, it will hugely impact your debt balance in a positive way.