Part 1: The Dave Ramsey Debt Snowball Method Explained
Wednesday, January 25, 2023
The Dave Ramsey debt snowball method is a strategy for paying off debt that is based on the idea of "momentum" or "snowballing" your payments. Here is how the method works:
- List all of your debts from smallest to largest, regardless of interest rate.
- Make the minimum payments on all of your debts, but put any extra money towards the smallest debt.
- Once the smallest debt is paid off, move on to the next smallest debt and continue to apply any extra money towards it.
- As you pay off each debt, the amount of extra money you have available to put towards the next debt will increase (like a snowball getting bigger as it rolls down the hill), which will help you pay off the debts more quickly.
- Repeat the process until all of your debts are paid off.
The idea behind this method is that it helps to create momentum by seeing some quick wins early on and therefore it will motivate you to keep going and tackle the larger debts. This can also help with managing the psychological burden of debt, as you will see some positive results in a short period of time.
It's important to keep in mind that this method doesn't take into consideration the interest rate of the debts, which means that you may be paying more in interest in the long run. Some people prefer using the debt avalanche method where you focus on paying off the debt with the highest interest rate first which will save you more money in the long run.
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Part 1: The Dave Ramsey Debt Snowball Method Explained
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