Snowballing debt is a valuable concept that we used to get out of debt. Do not get me wrong, getting out of debt has to be a mindset. It has to be a priority and it does take time. It is important that while we used this tool, we did not make any new debt. We were determined to make this work.
Like many people, we found ourselves in debt, raising four children, me going to nursing school, and a couple layoffs with my husband’s job. We found ourselves using credit cards to keep food on the table, and clothes on our children’s back. Before long, the debt went from a little debt to mounds of debt. It was easy to put things we needed on a credit card. Many young families have found themselves in the same predicament.
We decided that enough was enough and we would have to make a plan.The first thing we did was to make a list of all our debts. We made four columns on a piece of notebook paper, listing all our debts in the first column. Across the top of the paper, above each column, we listed ‘debts’, normal minimum debt payment, snowball payment (which we will discuss later) lastly, the fourth column will be the balance on each debt.
With snowballing, we listed our debts from the smallest bill to the largest. We found some financial advisors suggested that we list them according to the interest rate putting the highest interest rate first. We found that listing the smallest debt first afforded a bill being paid off sooner and that is where we received as instant reward. It made us feel as if we were making progress.
There is always a way to come up with an extra $20 to $100 dollars whether it be giving up Starbucks, ironing your clothes verses the cleaners, down grading your cable, or possibly getting a second job. I got a second job, and we downgraded the cable. We know longer went out to eat, and bought clothes at a second hand store. Getting out of debt was our first priority. When we received money back from our income tax, we applied it to our bills to reduce the balance. Gifts and surprises are nice; we would apply this money to our debt. It was not long before we could see our debt being reduced sooner.
We managed to come up with an extra $50.00 a month. We put that $50.00 in the third column. This took our monthly payment say of $20.00 on the first bill and adding it to the $50.00, giving us a total of $70.00. This amount was paid to our first bill while we paid the minimum on all our other bills. Once this bill was paid off, we took that $70.00 and applied it to the second bill, adding this $70.00 to our payment of $30.00 that was on our list. We would be now paying $100.00 to our second bill where only four months prior, we were paying $30.00 and half of that went to high interest. We could now pat ourselves on the back for taking control of our debt.
Before long we saw our debt starting to snowball, balances were reduced, and bills paid off. Snowballing debts was a great tool, which put us on a path towards financial freedom. Thankfully, we learned other creative ways to make ends meet, verses using credit cards. We are now debt free, no longer in bondage to the credit card companies.
