The Debt Snowball method to paying down debts has been around for a long time but it has become popularized and almost synonymous with Financial Planner and radio personality Dave Ramsey. Although from a financial standpoint, Dave takes a little different approach in how he recommends the debts be ordered, he praises this approach as a simple and straightforward way for people to dig out of debt. If you are unfamiliar with the Debt Snowball approach and how it works, please click the link to read my post about the Debt Snowball method and how to apply it.
Now that you have an understanding of what the Debt Snowball Method is, when does it make the most sense?
A Debt Snowball Method makes a lot of sense if you:
1. Have sufficient cash flow to cover more than your minimum payments on your credit cards every month.
2. Have good credit and want to keep it that way.
3. Are tired of simply making minimum payments that don’t seem to pay off much principle.
4. Want to do everything you can to pay back the entire debt with interest.
5. You have the self discipline required to put of purchases and allocate as much money to your debts as possible.
The Debt Snowball method is typically the first method that should be considered when you have reached a point where you realize what you are currently doing is not going to get you out of debt. It is a very simple and straightforward approach, that puts the money you do have available to its best use. The make or break criteria for determining if this approach will work for you or not is your cash flow. The more money over and above the minimum payments you can contribute every month, the faster you will be out of debt.
If you do not have a significant amount of money left over after making your minimum payments, you will either need to look at another option, or rework your budget in an attempt to squeeze some excess cash out. If that is not possible, then the next approach you will want to look into is Consumer Credit Counseling.
Have you ever tried the Debt Snowball method for paying down your debts? Please share your thoughts HERE