How do you get debt relief? If you are not totally in over your head with debt and can afford to make a plan to tackle your debt you may consider the possible benefits of using a system devised by Dave Ramsey called the Snowball approach. One major question people have is what bill should they be paying first. Check out Ramsey’s approach and see if it makes sense for you. Here are few questions he asks and his answers.
Should I pay off my debt with the highest interest rate or highest balance first?
Dave believes you should pay off your smallest debt first in order to create momentum in your debt snowball.
Debt Snowball Plan
Before you even begin to think about paying off more than your minimum payments of your debts Dave wants you to save up at least $1,000 for emergencies like car problems etc. Once you’ve got that then go nuts on your debt, except your house, and pay it off lowest balance at a time. Stay focused like a laser beam on the debt at hand and get rid of it as quickly as possible. Unless you have 2 debts that are close to the same amount then don’t be concerned about the interest rate on any of your debts. If you see small debts getting paid off you are more likely to stick with the plan and eliminate them all.
He wants you to build momentum
Dave says keep you to keep it up. Use the debts you’ve paid as wallpaper as a reminder that you are serious about getting rid of your debt. After you pay off a debt redo your plan and see how close you are getting to freedom.
Be Debt Free
Attack the smallest debt you have and maintain the minimum payments on everything else. That’s pretty much Dave Ramsey’s Snowball Plan. Psychologically this may be a good plan for you. Paying off the debt with the highest interest rate first regardless of size of debt will most likely save you more money than the Snowball Plan. If you need to build the discipline to pay off your debts than a serious look at the Snowball Plan may make more sense for you though. Best of luck.
Do you know any better ways to pay off your debt? Let us know.
To learn more about the Snowball Plan: click here