One word that no one likes to hear. However, I look at debt a little differently… there is both good and bad debt in this world. Good debt? Well, that could be something that helps you get ahead. Maybe that is buying a house and having a mortgage versus paying your landlord endlessly. Maybe it is using your credit card or loan to start a business that will in turn help you make more money. There is good debt out there, but getting rid of your debt as quickly as possible is always the goal because it saves you money in the long run.
So, do you have debt that you have been trying to pay off but it just doesn’t seem to be going away?? You are not alone if the answer is YES! I have a solution for you that has helped me to pay off all credit card debt in record time.
I will not take credit for this idea, but I did make my own worksheet attached below that you can download and print and use yourself to say “BYE BYE” to your debt.
So what is this magical solution? The solution is the “DEBT SNOWBALL EFFECT”. It is a quick way to pay down your debt while still being able to afford your monthly expenses.
Instructions on how to do it are on the worksheet itself, but I will get a little more in depth on here.
Step 1- Print the worksheet.
Step 2- Write in your total monthly income (what you take home) in the first box. This could be alone or combined income with a spouse if you are trying to pay off debts together.
Step 3- Take 20% of that total monthly income and put that into the second box. 20% is the amount of money that you should be able to put towards debt after all of your expenses are paid monthly. Now, of course this is in a perfect world and we don’t live in a
perfect world. We live in an overpriced world. If the remaining 80% of your income doesn’t cover your expenses then change this number to what works for you monthly. Sometimes it is uncomfortable, but you might need to make some budget cuts in your life. For example, stop eating out, cancel subscription services, buy items on sale at the grocery store, and stopping any unnecessary extra spending.
Step 4- List Debts from Smallest to Largest. The interest rate doesn’t matter for this.
Step 5- List the name of the debt, minimum monthly payment for each debt, your balance for the debt, and your APR (only for reference) in the box. If you have more debt than the 5 blocks can fit, then just print out another worksheet and use as a second page. I find by listing out every detail of this debt (including the APR) it motivates you and keeps you organized.
Step 6- Take the minimum monthly payment of the first debt and add to the next debts minimum monthly payment, that payment will be your “Snowball Payment”.
Step 7- Repeat for each remaining debt. Instead of adding the minimum payment, add the snowball payment.
Step 8- DO NOT use your credit cards again while paying off these debts! Dont be tempted, cut them up or hide them in a drawer for an emergency but do not use them!
Cross out each debt on the worksheet once you pay it off! You will be debt free in no time!! Oh and did I mention how SATISFYING it is?!
What this technique does, is compounds your debt and makes it more manageable to pay. You can do this!! Remember, don’t include mortgages on this. It is good to want to pay a mortgage off, however a mortgage is a different type of “debt”. It doesn’t affect you as negatively as the small debts such as credit cards, loans, lines of credit, car loans etc. If you have any extra money that month, make a larger payment! The more money you put towards the debt sooner, the more you will save in the long run.
GOOD LUCK!! YOU GOT THIS!!