More and more people look for effective alternatives to get out of the indebtedness cycle. One of the most popular and emotionally motivating methods is the call “snowball”a financial strategy that allows to settle debts progressively and organized.
What is the snowball method?
Popularized by financial advisor Dave Ramsey, the method consists of pay first the smallest debtregardless of their interest rate, while the minimum payments are maintained in the others. Once out, the money that was destined to that debt applies to the next smaller one, and so on.
Step by step to apply the method
Make a list of all your debtsfrom the smallest to the largest.
Pay the minimum in allexcept in the smallest.
Allocates all extra money to the payment of that first debt.
Once out, Apply that amount to the following payment of the debt that follows on the list.
Repeat the process until you are free of debts.
BENEFITS OF THE METHOD
- Psychological motivation Seeing rapid results
- Greater financial discipline
- Progressive reduction of economic stress
- Cumulative impulse that accelerates the payment process
Although there are other methods such as the “avalanche” – which prioritizes debts with greater interest – the snowball is ideal for those who need Visible results from the beginning to stand firm in your target.
