Debt payoff
This is the most crucial part of any cash flow plan. High-interest debt will likely lead to cash flow failure in almost any situation. Debt Snowballing is one of many effective ways to take control of debt. Our easy process allows anyone to pay off debt much faster than conventional debt reducing programs.
Debt Snowball
The debt snowball is an approach that helps you pay off all of your debts in a systematic way. Rather than focusing on interest rates, list your debts in order starting with the account that has the lowest balance, and progressing to the account with the highest balance (don't include your mortgage). Don't pay attention to interest rates (unless accounts have similar balances – then list the accounts with the higher interest rates first).
Now, rather than paying a little extra every month on every account to bring each balance down just a little, pay just the minimum on all the accounts each month. Figure out how much extra you can pay each month, and devote that to the debt with the smallest balance. Devote any other additional funds you may come into to paying off the smallest debt until it is gone.
With that debt paid, move on to the next smallest debt. Pay the minimum payment each month, and "snowball" the amount you were paying on the account you just paid off into the payment for the account that now has the smallest balance. You can also add any extra that you can come up with, even it you can't pay that much each and every month.
As you pay off each account, build the snowball – devote that payment to paying off the next larger balance. The payments you are making toward the next largest account balance grow, so you make bigger and bigger payments on your larger accounts as you eliminate the smaller account balances.
The result: you develop momentum by focusing on one at a time, eliminating the account with the lowest balance, and then applying the funds you were devoting to that payment to the next account.
This domino effect, or the snowballing effect of making ever-larger payments toward your larger debts, helps you experience success and keeps you on track. It provides a great illustration to help keep you focused on paying off all your debts – as you pay off the smaller debts and take them off your list you see the progress you are making.
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