How to Tackle Debt
Here’s the main problem with debt: Your income is your greatest wealth-building tool. But debt is all about paying off the past—putting this month’s income to something you bought last month, last year or even longer ago. You can’t move forward like that.
Debt holds your income hostage. It holds your future hostage.
But you can take back your income. All of it. How?
Pay Off Your Debt With the Debt Snowball Method
Here’s a rundown of how:
- List your debts in order from smallest balance to largest. (Ignore the interest rates right now.)
- Then, attack the smallest debt first. Put any extra money you can get (by lowering your spending or upping your income or both) toward that debt.
- While you’re doing this, keep paying the minimum on the rest of your debts.
- Once you’ve paid off the smallest debt, start on the second smallest. Take all the money you were throwing at your smallest debt and add it to the minimum payment of the second.
- Once that one’s paid off, move to the next one, then the next, and so on until you’ve paid off everything.
Think of a snowball rolling downhill, gaining size and speed. You’re doing the same thing with your debt, knocking out each one—and getting crazy momentum and motivation as you go!
By starting with the smallest debt (instead of focusing on interest rates), you get quick wins early—and that gets you pumped to keep going until you’re totally debt-free.