Debt snowballing is a term used by Dave Ramsey to explain how to pay off debt.
I have written about this before but it is such an amazing way to pay off debt. It may not be fast but it definitely produces results.
As with creating a snowball from snow, you start off with a small amount and this amount will grow larger as you pay off each debt. Snowballing at its best.
In the FB group https://www.facebook.com/groups/iamdebtfree/. There is an ongoing challenge for each member to choose one debt. I chose my smallest debt.
Each month you pay your installment and add extra money to that payment amount. For my personal debt snowballing challenge I am adding R 40.http://kasheringyourlife.co.za/debt-free-with-r40-per-month/
The amount is actually only the cost of one cup of coffee from either Starbucks or Seattle. Not a lot of money if you look at it that way.
Here’s how it works
I am using random numbers to help as I am not good at maths!
Here’s how it works
You pay off your first debt. You now have that amount plus, your R40 to put towards your next debt. Your snowballing has begun.
Once the second debt is paid off you will have, debt 1’s installment, plus debt 2’s installment and you can drop the R40. This money is then put towards the next debt. As
As you pay off each debt you have more towards the next debt, this is your snowball.
As your snowballing continues, your snowball increases in size and your debt decreases.
Debt snowballing only works if you don’t incur any further debt! It does take discipline but the feeling of paying off your debts and watching the numbers go down is amazing.
If you don’t think you have the R 40 to spare then just round up every debt you can to the next rand. http://kasheringyourlife.co.za/debt-cents-getting-out-of-debt-a-little-at-a-time/
One thing you do have to be aware of is the fact that some stores do not decrease your installment just because your balance is getting lower. While this may not seem fair or reasonable it does have it’s plus side. You pay off your debt that much quicker!
Are you going snowballing at the end of the month?