When you’re in debt, every day can feel like a constant struggle. You spend your days avoiding phone calls from creditors, making deals to make payments that you never intend to follow through on, and trying to think about anything else but your debt. Even so, that mountain of responsibility isn’t going to go away until you handle it, no matter how much you try to avoid it.
Financial teacher Dave Ramsey offers some great insight into debt payment strategies that he has recommended for people for years. He uses a system of baby steps in his program, Financial Peace University.
The first step in the process is crucial to success in the subsequent steps because it encourages people to prepare for the unexpected. Couples are instructed to save $1,000 as quickly as possible, while singles are instructed to save $500. This ensures that any issues that might arise while debts are being paid down can be handled without stopping the debt payment process.
The second step is completely focused on debt relief, and it’s worked for many of those who have taken his course. Step two is the Debt Snowball. In order to make this strategy work for you, simply write down a list of all of your debts, not looking at how old they are. Once you have a list (even if it’s a long list), make another list in which you chronicle these debts according to their balances. Begin your Debt Snowball by paying off the smallest debt first. Once you’ve paid that one, pay the next smallest one. Continuing this pattern allows you to build momentum, thus creating the snowball effect.
It’s encouraging to pay off your debts and cross them off your list. In fact, it can become like a game, encouraging you to continue adding to the amount of debt you pay off. Before you know it, that Debt Snowball can become quite large, and eventually, you’ll be debt-free!
The Bottom Line
If you’ve found that you’re in debt, and you’d like help getting out, there is a help that’s available to you. Don’t continue to live your life drowning in a sea of debt. For more useful debt-repayment strategies, check out the many useful tips on our blog.