Whether you’re a fan of Dave Ramsey or you’ve heard of the “Debt Snowball Method”, it’s a great strategy that you can use to tackle your debt rather quickly.  Am I fan of this debt strategy, personally?  Yes, I think it works great for behavioral purposes, but if you’re looking to save money on interest, you may not want to attempt this method.

Let’s take a quick gander at how the snowball debt method works –

STEP ONE:  The first thing that you want to do is gather up all of your debt statements.  This is going to range from credit cards to student loans.  If you owe money on it, you’re paying it today.  Once you have all of your statements laying in front of you, it’s time to proceed to step two.

STEP TWO:  Once you have the statements laying in front of you, I want you to sort them from lowest balance to the highest balance.  The statements with the highest balance should be on the bottom, while the lowest balance should be on the top.

STEP THREE:  Now, once everything is organized, you’re going to pay the most money toward the lowest balance first.  You have to keep in mind though that you have to pay the minimum on all of your other cards, while putting as much as you can toward the lowest balance.  This may not make much sense interest rate wise, but studies have shown its more psychological, encouraging people to tackle their debt quicker.

STEP FOUR:  Once your first bill is paid off, you’ll want to do the same to the next bill.  You’ll want to continue this until all of your bills are paid off.  Depending on how many bills you have will depend on how long you’re going to take to pay it off.  Someone with $15,000 in debt is going to take a little longer than someone with $4,000 in debt.

The point of the “snowball” is that once you get to those larger debts, you’ll be able to apply more money toward them compared to the smaller debts.  Once you have the smaller ones paid off, you’ll feel better because you’ll only have one statement in your hand.  Again, it’s all in the mind, but it tends to work very well. 

If you’re looking for other strategies, this one is worth a shot.  Remember, taking action, and applying money can take you a long way.