Mar 13 2009
The Debt Snowball, the best way to get out of debt
There are a lot of arguments around the blogosphere on the best way to get out of debt. I side with the Dave Ramsey crowd however in that I think using the “debt snowball” method makes the most sense.
What it really comes down to, however, is what works best for YOU. Either way you’ll need to spend less than you earn, apply diligence and self discipline, and prepare for an uphill battle.
The debt snowball method involves listing your debts smallest to largest (by outstanding balance, not interest rate). You then make minimum payments on everything but the smallest debt, and put all extra funds towards that smallest debt. The idea is that you’ll knock out your small debts quickly, at which point you can roll those minimum payments plus all extra cash to pay off the next debt and then the next one. Very quickly the funds you have available to pay down debt will increase and keep you motivate to finish and become debt free!
