There are a few ways to approach your debt repayment, but let’s not go into all that. Let’s just do it the way that’s gonna work, shall we?
The debt snowball method is the most common method to pay off debt because it actually works.
The debt snowball method is when you pay off all your debts in order from the smallest amount leading up to the largest.
The reason this is the most successful method is because the accomplishment you feel from paying off those smaller debts gives you the confidence and momentum to keep going.
In my experience, another benefit is that it simplifies the situation more quickly.
If you’re paying 6 credit card bills each month but are able to pay off 2 of them fairly quickly, then you've simplified by having fewer bills to pay each month.
And then once those smaller bills are paid off, you can increase the payment toward the next debt on your list by the amount you were paying to the debt you just paid off, making the snowball bigger and bigger as you pay all your debt off.
Now, if you've heard before that the "smartest" way to pay off your debt is to pay off the debts with the largest interest rate first, well that's true.
If you pay the debt with the largest interest rate and going down the line to the debt with the lowest interest rate, you'll pay less interest over time.
However, let's say you have a debt of $15,000 with an interest rate of 19% and you also have a debt of $900 with an interest rate of 9%.
The "smart" way would be to pay off that larger debt first. However, if you tackle that larger debt first, you might get discouraged and give up because it's taking too long and you feel like you'll never be able to pay it off.
And in that case, you don’t save any money on interest because you still have both debts.
However, if you pay off the $900 debt first and feel so confident and successful because of this accomplishment that you power through and pay off that $15,000 debt, then you succeeded in the end.
And that's the most important result.
It's important to choose the strategy that will help you get to the end faster, or at all. And the snowball method has been proven to be the most successful method for most people.
If you're on my email list and already have my Excel debt repayment tracking chart, you'll be able to easily organize your debt in order from smallest to largest amount, in about 2 minutes.
Go do that now so you know exactly which order you are going to pay off each of your debts.
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