“SNOWBALL” Debt Repayment Strategy – 100% Effective

Snowball Strategy for Debt Management

The coronavirus lockdown and its effect worldwide are not unknown to anyone especially individuals who saw their salaries slashed, job loss or the business sales went down. As a result, the use of credit cards and personal loans skyrocketed, leaving many people trapped in debt.

If you are the one who got impacted during the pandemic, then remember that the world may be edging towards a recession in 2023 that may have similar impact. And the Snowball strategy, considered to be the most powerful and yet simple debt management solution will bring down the financial pain to a great extent possible.

“Snowball” strategy focuses on eliminating the debts that are quicker to cover, so that, as we move out of the payment obligation by paying off such debt, it allows us to allocate larger amounts to pay off the larger debts.

Identify and eliminate your ant expenses

For those who don’t know, ANT expenses are the small and regular payments you make unconsciously towards any services or products which are unnecessary.

If you haven’t started doing so, then this is the perfect time to reduce or completely stop ant expenses. Don’t wait until tomorrow. E.g. Frequently paying for a morning coffee, newspaper, magazine, OTT subscription or soda etc. can be considered as ant expenses.

Just think about it: A $10 coffee per day will cost $300 in a month.

Of course it’s important to treat yourself once in a while. But, if you’re deep in debt, it’s worth making the sacrifice.

Once you get out of debt, you could take back those treats. It’s better to first prioritize saving to create your emergency fund, so that when you face new setbacks in the future, you’ll be prepared and won’t be left in debt again.

Review your budget and stop unnecessary expenses

If you don’t have a budget, it’s time to start doing it. The idea is to identify those expenses that are not a priority, such as subscriptions to watch series or listen to music on the Internet.

Again, it is not about running out of distractions, but only about focusing your efforts to get out of debt. When you achieve this, if you want to, you can reinstate your subscriptions.

List your debts and put them in order

The first step is to list all your debts and order them in ascending order. That is, put the ones with the smallest balance first (which you can repay faster), and then the ones with the highest balances.

The Snowball Effect

  • Use the money you’ve managed to save by eliminating the ant expenses and your unneeded expenses to pay off the smallest debt.
  • Once this is done, you add to the money you have saved what you used to pay that first debt, concentrating all that money to pay off the second one as soon as possible.
  • Once you have paid off the second debt, to the money saved and the money destined for the first debt, you add the money destined for the second debt, and with that you pay off the third debt!
  • As you can see, the more debts you pay off, the more money you will have to pay off the larger debts.
  • The strategy is foolproof! Just don’t let your guard down, stick to your goal, and avoid using the money you free up to spend it on other things.

Create alternate sources of income

If you make it, that would be great! Since the additional money could be used to further increase the amount you have to pay your debts.

  • Sell unused goods
  • Give private lessons to strengthen children or teenagers in those subjects that are easy for you.
  • If you play guitar or draw, you could also give lessons.
  • You just need to be creative and focus on your strengths.

Check out: 31 legit extra income sources

And, of course, once you pay off your debts, the additional income could be used to save, and thus achieve other goals you have (down payment on your house, change your car, travel, etc).

Don’t keep getting into debt!

Discipline and consistency is the most important part of the whole strategy. If you keep acquiring new debt, you’ll never get out of it!


Nikesh-Mehta-AllOnMoney

Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected].

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