The debt snowball method is a strategy that uses motivational momentum to reduce, and eventually eliminate your debts. Paying off each debt starting with your smallest and working your way up to your largest. The satisfaction from paying off small debts gives you the motivation to keep going until you are debt free.
How the method works in 6 steps:
1. List out all your outstanding debts.
2. Sort your debts from smallest to largest outstanding balance.
3. Pay extra toward your smallest debt.
4. Keep at it until you pay off your smallest debt.
5. Roll your payment from your now paid-off debt into your second smallest debt.
6. Keep going until your debt is paid off.
Some examples of debt are:
Credit card balances
The debt snowball method appeals to the way our minds work. If you try to pay down your largest debt first, you could easily get discouraged. Starting with your smallest debt first, you’re setting yourself up for success. Motivation and confidence help keep you going. That momentum is the key to achievement. When you’re managing thousands of dollars of debt, it’s easy to feel like your financial life is out of control. By committing to tackle your debt one account at a time, you might find your whole financial situation more manageable. With RentPlus Money, the debts tool helps us look at debts with a long-term perspective as opposed to the shorter-term monthly payments on those debts. RentPlus Money allows you to organize your debts in order of the fastest pay-off first. Based on the balance, APR, and minimum payment we can calculate when the very last payment on that account will be. Try the debt snowball method and build momentum to pay off your debt.