Hello there, I'm Kit Lancaster, your dedicated Certified Financial Planner from Sterling Edge Financial. It's my passion to simplify complex financial topics so that you can better understand money and how to make more informed financial decisions.
Today, let's talk about something I like to call the "Debt Snowball Method". No, we're not talking about a frosty fight here, we're talking about a strategy to help you get a handle on your debt, gain momentum, and gradually eliminate it.
Picture yourself in a snow-covered landscape. You want to make a big snowball, right? What do you do? You start with a small one and begin rolling it around. As it moves, it picks up more snow, growing bigger and bigger until you have a sizable snowball. That's precisely how the Debt Snowball Method works.
You start by listing out all your debts, from the smallest to the largest, ignoring the interest rates for now. The main idea here is psychological - we want to build confidence and momentum. Paying off a smaller debt can give you a sense of accomplishment, and that's the fuel you need to tackle the next one. Start by focusing on that smallest debt first, throwing as much cash at it as you can while still making minimum payments on the rest of your debts. Once that first debt is paid off, don't celebrate by inflating your lifestyle just yet. Instead, take the money you were using for that first debt and roll it over to the next one on your list, just like you'd roll that snowball across the yard.
See, the magic here is that as you continue to eliminate debts, the amount of money you have available to pay off the next one increases, creating a snowball effect. This means that the payments get larger and larger as they move down the list, thus accelerating your debt repayment process. The Debt Snowball Method might not be for everyone. If you're more numbers-oriented, you might find the "debt avalanche" method – where you prioritize debts with the highest interest rate – more satisfying. But if you're looking for a strategy that gives you quick wins and keeps you motivated, the Debt Snowball Method might just be the key to your financial freedom.
Remember, no two snowflakes are alike, and neither are your financial situations. At Sterling Edge Financial, we're committed to helping you find the debt repayment strategy that works best for you.
Take care, and remember, you're in control of your financial future. Let's keep rolling towards success.
Looking for a debt repayment strategy? Let's find time to connect soon.
Additional reading
https://www.nerdwallet.com/article/finance/what-is-a-debt-snowball
https://www.sterlingedgefinancial.com/resource-center/money/strategies-for-managing-student-loan-debt
https://www.sterlingedgefinancial.com/resource-center/lifestyle/debt-stress