The Debt Snowball

Creating Momentum For Your Financial Future The true path to financial freedom is paved with debt elimination. Building wealth with debt is like trying to run with a parachute. You’ll always be held back, slowed down, and occasionally knocked off your feet. That’s why we recommend starting with a tactic called the debt snowball.

just as a snowball rolling downhill gains momentum and becomes bigger, so too can you gain momentum as you pay off debt. He how it works; The debt snowball starts with the lowest monthly payment. By attacking your smallest debt first, you’re able to eventually eliminate that debt and subsequent monthly payments.

The debt snowball grows when you add that monthly payment to your debt payment plan (instead of spending it). When you reinvest in your payment plan, more money goes towards paying off your debts. Once your second debt is eliminated, reinvest that money into the payment plan again. Eventually, that snowball turns into an avalanche.

So, let’s say your smallest debt has a $20 monthly payment associated with it and the second

smallest has a $50 monthly payment. Once that first debt is paid off, you can take that $20 and add it to the $50 payment. You’re now paying $70 to your second debt! Once that second debt is paid off, you can then take that $70 and roll it into your third smallest debt.

The two keys to making this work are operating with a budget and committing to a lifestyle change. Paying off debt requires sacrifices, and that means trimming the fat from your budget. This doesn’t mean life ceases to exist and you turn into a hermit; instead, it’s about telling your money where to go rather than letting your money tell you.

if you want to learn more about how a debt snowball or other financial strategies can affect your financial goals, contact us today. We are committed to helping you take control of your financial future, and that starts with eliminating debt. -Novae Money