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Dave Ramsey’s Snowball Method Works Or….You Could Try This
Approach 1: Snowball
The advantage of the snowball method is that you can focus on paying off one credit card at a time. Extreme focus allows you to expedite your progress.
Once you’re done paying one credit card off, you simply start focusing on the next card until you’ve paid off all of your credit cards in full.
For The Cards Not In The Spotlight
Whichever credit cards are not focused on (getting the larger payment), you only pay the minimum payment.
Because when you make large payments on multiple cards, it slows your progress down. It will get you to the appropriate destination – eventually – it will just take longer.
Credit Card 1: $500/month (spotlight payment)
Credit Card 2: $75/month (minimum payment)
Credit Card 3: $25/month (minimum payment)
Approach 2: Minimum Payment Til You Die
If you take approach 2, you might be paying the minimum payment on your credit cards for several years – maybe even decades. You can take this approach to keep your expenses low, but you’re going to end up paying a sh*tload of additional money on interest fees.
Instead of paying $2,000 for that laptop, you might end up paying $4,000-$5,000. The question is, do you want to pay double what you paid initially?
Credit Card 1: $100/month (minimum payment)
Credit Card 2: $75/month (minimum payment)
Credit Card 3: $25/month (minimum payment)
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Approach 3: A Little Bit Of Everything Thing
This approach is suitable for those obsessed with making little progress on everything. I’ve taken this approach at times because it’s visually satisfying to see the balance significantly decrease on multiple cards over time.
Credit Card 1: $200/month (average payment)
Credit Card 2: $200/month (average payment)
Credit Card 3: $200/month (average payment)
A cool thing about this approach is that you can execute this approach for a year or two and then pay off 1 or 2 credit cards using approach one (the snowball method) the following year since you made significant enough payments to put a dent in multiple balances.
What’s The Best Approach?
It all comes down to preference, but approach 2 is the worst since you’re going to end up paying significant amounts of additional money in interest repayments.
While You’re Paying Off Your Credit Cards
Don’t add additional debt while you’re paying off your credit cards. You’ll only slow your progress down. If this means you need to take a knee on entertainment, travel, and shopping trips, then let it be. It’s a temporary sacrifice while you implement laser-focus discipline to eradicate your debt.
Once You Pay Off Your Credit Cards
Many people who pay off their credit cards end up right back where they started because they don’t have a sound system in place.
If you want to avoid getting yourself back into debt, you need to ensure you live below your means. If you spend more than you earn, you will consistently rack up debt you can’t afford.
Once you pay off your credit cards, you have a clean slate. What will you do with it? What will your system be? What will you do differently – in the long term – that will ensure you avoid the financial mistakes you made before.
System 1
One system you can put in place is to set up automatic monthly payments on all of your credit cards to pay your statement balances in full. If you never carry a balance, you will never accumulate credit card debt.
System 2
Another system would be to forgo all credit cards and use a debit card, which means you only use the money you have to make purchases.
Credit cards can be sneaky if you’re not careful. They always make you feel like you have more money than you actually have.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.