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When people with money meet people with experience, they end up with your money and you end up with experience – Anonymous
Ever since embarking on this journey, i naturally had to research a whole lot of money matters, which i should’ve done at the front end of my working career, but enough said 🙂 Now that i’m in this hole, i can safely say that i discovered and found a system that works for me and my family; and that is the ‘Debt Snowball’.
WHY THE DEBTÂ SNOWBALL?
According to a recent study by the Harvard Business Review, the BEST repayment strategy that anyone can use for debt repayment is the ‘Debt Snowball’.
Part of the research excerpt reads:
“The anonymous data, spanning a period of 36 months, included monthly credit card information—spending, repayments made, and outstanding account balances for a total of nearly 6,000 HelloWallet clients, with an average of 2.5 credit card accounts.
Presumably, indebted consumers who enroll with HelloWallet have the long-term goal of paying off their debt or at least managing their debts more effectively. We found that consumers who concentrated their repayments on one of their several accounts paid down more of their card debt than those who dispersed their repayments equally across multiple accounts”
It’s been around for a while, Dave Ramsey introduced us to this concept in his book ‘The Total Money Makeover‘ where the premise was to pay off debts in the order of smallest to largest.
There’s a lot of controversies and so-called financial experts are in an uproar due to the implied simplicity versus logic, but debt repayment is not about doing the math and figuring out the highest interest debt to be repaid first, we’re already in the hole, the goal here is to be as motivated as possible, knocking down smaller debts to largest, utilizing the snowball effect, in order to finally be rid of ALL debts.
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MORE INFO
For an in-depth look at how the ‘debt snowball’ works, head on over to Dave’s page here, and if you still need further validation, see this recent Business Insider article citing the same research above.
I’m currently utilizing this exact method and the way I budgeted for my repayment, I should be done in 70 months to knock down $124K worth of debts, barring any earth-shattering emergency, I’ll surely have my progress updates posted as I go along.
CONCLUSION
Whatever method you end up using, just remember, debt repayment is a journey, not a sprint, after all, we didn’t get in this hole overnight so we shouldn’t expect to get out of it quickly either.
Stay motivated, keep your eyes on the goal, be flexible, always learning and make your journey your own.
Peace and Blessings to you all.
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