Money Matters: Grow a Snowball Year Round

Pay Off Debt and Become Debt Free with the 

Snowball Debt Repayment Method

1. Spread all of the bill statements out so that the interest rate, if applicable, and the balance due can be seen.
2. Sort the bills from lowest to highest dollar amount.
3. Then sort those bills by interest – higher to lower.  For example if you have two bills for $300 and one of them has interest for 4% and the other for 5%, put the 5% first.  That bill is costing more money in the long run and needs to get eliminated as soon as possible.
4. Next, make a list of these bills in the order that you have placed them in hand.
5. Next to each bill write down the total due, the minimum payment amount, and the finance or interest rate.
6. Pay all of the bills the minimum payment amount.  If there is anything extra that can be paid toward the debt elimination, put it all on the first bill on the list.  When the first bill is paid off, that’s a WIN.  Celebrate….for a moment.
7. Next month, apply all of the payment amount that when on the first bill each month with the minimum payment that goes to the second bill.  So if $60 was going to the first bill and $50 was going to the second bill, the payment for the second bill every month until pay off is, $110. 
8. When the second bill is paid off – Celebrate…for the moment.
9. Continuing on with the example, the next month take the $110 and apply it with the third bill.  If that third bill was $60, now the monthly payment amount for that bill until pay of is: $170.
10. As the bills are marked off down the list as paid off, the bills are getting paid off faster and faster because more money is being applied to the next bill cutting the length of time to repayment than if the bill was being paid with the minimum payment amount.
11. The snowball debt repayment plan can take anywhere from one year to five years depending on the total amount of debt and how much money is going toward paying off that debt.

Once the debts are paid off, the money that was going to debts can now go toward creating your passive income.



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