What is it?
“Debt snowballing,” as some refer to it, is a method of paying down debt. The idea is you focus on paying off one outstanding balance at a time, starting with the one that carries the highest interest rate. Then keep going until you’re a debt-free woman!
How does it work?
1. Separate your debt into “good” debt and “bad” debt. A mortgage would be a good debt since it's tax deductible. A credit card is bad debt since you can't write it off and the interest rate could change overnight.
2. Compare the interest rates of your bad debts, and put them in order. You first want to pay off the debt with the highest interest rate. If there are several, Weston recommends starting with any credit card that is over 80 percent of the credit limit.
3. Analyze your expenses and free up as much money as possible to go toward paying off your debt. You’re going to pay the minimum balance on all of your debt, then throw any extra at the one you targeted.
4. Set up automatic payment! You want to make it so that you don’t have the option to decide whether that money is used to pay off your debt, it just happens.
5. Once that first targeted debt is paid off (wasn’t that fast?), go after the debt with the next highest interest rate. You’ll continue to funnel the same amount of money toward paying off that next debt.
6. Keep it up until all debts are paid off.
Who is it for?
Weston advises anyone with credit card debt, which is toxic debt and can harm your credit score, to use this method. If, however, it’s already a struggle for you to make the minimum payments, you might be in too deep. Arrange to meet with a bankruptcy attorney to discuss your other possibilities. “Most people, if they can make their minimum payments plus a little more, can eventually dig their way out,” Weston says.
