If you have a lot of debt you may be wondering how in the world you’re going to pay it all off. The first thing you should do is to figure out exactly how much you owe and to whom. Input this information into a spreadsheet. If you don’t have a program for that use Google Docs to create one. You won’t need a program installed on your computer to use it, it doesn’t create a physical file on your hard drive and you can access your data from any computer by logging into your Google account.
After you’ve inputted everything you owe, you may be discouraged by that large number you’re staring at. But don’t be. There is hope. All you need is a plan. The hardest step in any journey is the first one you take. After that, everything just seems to fall in place. Once you get the ball rolling it’s going to continue rolling. If you roll a snowball down a snow filled mountain it will get bigger and bigger as time goes on.
Once you have all the information about your debts in front of you, you’ll need a debt repayment strategy. You’ll need to figure out who to pay first and how much to pay. One strategy of debt repayment is the debt snowball method popularized by Dave Ramsey.
Here’s how the debt snowball strategy works. First, sort your debts from the smallest one to the largest one. The debt snowball method consists of paying your smallest debts first. Tackle the smallest one and then move down the list. Do this while only paying the minimum payments on your larger debts. If you continue on with this strategy you’ll be eliminating your creditors fast and making progress on your overall debt. This method has both a psychological effect and a real effect on your debt.
Some disagree with this method however. They claim that you should sort (and pay) your debts by the highest interest rate accounts first. The theory goes that it’s your interest rates that are killing you, not your balance. But whether you agree with this debt snowball method or not, you have to at least admit that it’s a strategy that does pay off your debt. And sometimes all we need is a plan to give us hope that there is a debt free life ahead.