Having some debts is a natural part of life but when the debts you have grow more numerous, it can feel overwhelming.
If you’re looking for a good way to help pay off your debts for good, let’s talk about the debt snowball method. It’s a fast way to pay off multiple debts and gives you a feeling of financial control over your life. It’s recommended by licensed insolvency trustees throughout Ottawa.
Let’s take a deep dive into what the debt snowball method is and the psychology behind why it works.
What is the Debt Snowball Method?
The debt snowball method is a debt-reduction strategy for dealing with multiple debts at once. It focuses on paying smaller debts first and then eventually paying off the largest ones as you gain financial momentum.
List your debts in order from smallest to largest
Make the minimum payment on all debts except the smallest
Put as much extra money as you can into your smallest debt until it’s been paid off
Take the amount you were paying on your smallest debt and add that to the amount you are paying on your next smallest debt until that too is paid off
Repeat this process until you’ve paid off all your debts
The theory is that, as you knock out your debts one by one, the amount of money you can put into each one grows, much like a snowball rolling downhill. It’s highly motivating and easy to follow.
Why It Works
The reason this method works is simple – it feels good to pay off a debt. This method is all about modifying your behaviour. You start to truly believe that you can pay off all your debts. Once you start to believe, you’ll begin to act like it.
When you pay off a debt, even a small one, it makes you feel good and gives you a psychological boost towards paying off the next one. As you pay off more and more debt, you’ll feel better and better about it until your debt is clear and you are free.
It’s also very easy to follow – you don’t need to try any complex math to figure out the interest rates for different debts. All you need is the balance of each debt to rank them in priority.
D & A MacLeod Company Ltd. is a Licensed Insolvency Trustee in Ottawa
At D & A MacLeod Company Ltd., we are a licensed insolvency trustee in Ottawa, offering credit counselling and debt advice. If you need help managing your debts, you can count on us. We help with debt consolidation, consumer proposals, credit counselling, wage garnishment, and much more. Our goal is to help you find solutions for your debt problem.
We highly recommend you try the snowball method first when you have multiple debts. It’s an easy and motivating way to address them. If you need advice or assistance, please reach out to us and speak with a licensed insolvency trustee today.
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