Debt snowball method
The debt snowball method is one of the most popular debt repayment strategy that involves paying off your debts in order from smallest to largest balance, regardless of interest rates. This method is popularized by personal finance expert Dave Ramsey, who believes that the psychological benefits of paying off small debts quickly can motivate people to continue the process until all their debts are paid off.
The debt snowball method actually works,
- by focusing on one debt at a time, starting with the smallest balance. You make the minimum payments on all your debts except the one with the smallest balance, on which you will make the largest payment you can afford. Once that debt is paid off, you move on to the next smallest debt and repeat the process until all your debts are paid off. The advantages of the debt snowball method is the sense of accomplishment that comes from paying off small debts quickly. This can provide the motivation to continue with the process until all your debts are paid off. Additionally, the debt snowball method can simplify your finances by reducing the number of debts you have to manage.
The debt snowball method can be an effective debt repayment strategy, particularly for those who need a psychological boost to stay motivated. While it may not always be the most financially efficient strategy, the benefits of simplifying your finances and staying motivated to pay off debt can make it a worthwhile approach.
