Whether it’s your student debt, your car payment, an impulse buy, or all of them and then some, the monthly payments on your loans are probably eating into your earnings more than you would like. Luckily, there’s one simple trick to help you pay off all of them at full speed.
When it comes to paying off debt, people are usually more likely to start with the debt with the highest interest rate as it is devouring the greatest chunk of our income. However, one of the most famous money coaches in the world Dave Ramsey came up with a method that disregards the interest rate entirely and focuses on the amount owed instead.
The principle is simple – list all your loans by their outstanding balance from smallest to largest and then focus all your efforts on getting rid of the smallest ones first, paying only minimum payments on all other loans.
“You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction,” says Ramsey.
Once you’ve got your first debt out of the way, move on to attacking the next one on the list. As you have paid off your first loan, you can now put in even more money to get rid of the next. That kind of momentum building is why this method is called the Snowball Debt Method – you gain speed every time you pay off a new debt.
Dave Ramsey is a vocal proponent of life without debt. So are we here at Monese. That’s why you can never go overdrawn on your account and our super smart mobile app helps you stay on top of your finances wherever you are. Monese will be launching this summer so get invited now at www.monese.com!