Tuesday, August 12, 2014

How To Make Financial Snowballing Work for You

If you’re like 99% of Americans out there today, you probably have some debt. If you don’t, then great! This article won’t do you any good. If you do, however, know upfront that you’ve probably heard this all before. It’s a theory of paying down and finally paying off debts that works, and so it gets reprinted, rewritten, and re-attributed to a number of different originators. Sometimes, the theory gets revamped along the way, but for the most part, it falls under the category of being “not broke, so don’t fix it.” The technique is called “Snowballing,” and it might be one of the best ways ever devised to pay off your debts permanently, and avoid miring yourself in debt in the future.  

Snowballing your debts tends to work because it’s both a realistic approach to paying off debt, and it also tends to provide a level of quick gratification that other methods may not be able to accomplish. Of course, it’s never just as simple as snapping your finger, so bear in mind a few tidbits of information along the way before you get started thinking that your debts will be gone in a flash with no effort whatsoever. That just isn’t how it works. You’re going to have to get a budget put together, know where your money is going from month to month, and then avoid frivolous expenses that will only set you back further. With that in mind, here are some expanded tips that might just help you maximize the benefit of snowballing so that you can put those debts behind you quickly.

First off, as I mentioned above, you need to do some initial paperwork, most particularly a budget. It is utterly critical that you know where your money is going every month, so get started now. Write down all your expenses, and don’t withhold anything. You can budget in entertainment expenses as well, so don’t worry about being totally bored until your debts are paid off. There are a number of budget worksheets available on Pinterest and a host of other websites that are free to use, so don’t be shy about printing one out. It’ll make things easier, trust me.

Next, it’s time to kick out those extraneous expenses. Lighten up on your fancy coffee intake, carpool, whatever it takes to minimize your monthly outflow of cash. You might have to cut subscriptions, but again, don’t be shy. Figure out what you actually use monthly, what you don’t use, and cut back!

When that’s done, it’s time to consolidate debts as much as possible. Can you take out a personal loan to do a balance transfer from your high-interest credit cards? If so, then do it! You might save thousands of dollars in interest by not carrying balances on those credit cards. Choose the lowest interest rate loans you can find, and be sure there’s no prepayment penalty on them so that when you start snowballing, you won’t be tripped up by big fees for overpaying your monthly payment.

Yes, you’re going to have to cut up your credit cards. Stop spending on them! If you can do it and resist temptation by tossing them in a drawer, than so be it. Otherwise, get out the scissors and get cutting. You’ll get tripped up big time with even just one little “emergency,” and then before you know it, you could be in even bigger trouble than you were in to begin with.


Now that you’ve got your things consolidated, we’ll talk about how snowballing really works. It’s surprisingly easy, and as long as you’ve got your things together, you’d be surprised by how easy it can be! Check back at this blog in a few days to go over the basics!

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