The Debt Snowball
Ever heard of the debt snowball method of ridding yourself of debt? I was clued onto it by a friend that had recently gotten themselves out from under a mountain of debt, and I was intrigued. I do not carry debt myself, but I have since recommended this method to friends that were not as fortunate as me in having a father that taught me all about personal finance.
The debt snowball method is very effective from what I have seen. Because many people with significant debt have the emotional feeling of drowning, the debt snowball method recommends paying off the smallest debts first. As each smaller debt is paid off, the payment that went into it is rolled over to the next smallest debt to be paid off. In this way, the payments “snowball” into an effective method that gets rid of all outstanding debt. I like this method a lot because it really helps people get out from the psychological burden of never paying anything off. Seeing each debt slowly fall to the payment snowball eating it up must be a really great feeling.
The only aspect of it that I do not agree with is a complete and utter ban on the use of credit cards. I think that credit cards can be an effective tool just like any other tool in personal finance, provided that they are used responsibly and not for unnecessary purchases. It is not the card’s fault if you go into debt, it is your own fault for using the card irresponsibly. But beyond that minor problem I have with the debt snowball repayment plan, I think it would be a very effective way for people that feel their debt is insurmountable to get themselves out of the hole.