Attack That Debt

This is a proven method that helps you stay on track with attacking your debt. This method gets criticism and I will explain why. It is your life and your money, and all I can do is show my work to why I believe what I believe. I am not trying to hide anything from you, or pull anything over your eyes.

This is called the "Debt Snowball Method" and the first I heard of it was from Dave Ramsey's book Financial Peace.

The first thing you have to do is make a budget and set aside however much money you are going to put towards debt each month. I am not going to go into this but I am assuming you have canceled the cable, lowered your cell phone plan, got rid of the gym membership, and done any and everything to free up money in your monthly budget to attack debt. Now once you have that number that you are going to attack your debt with write it at the top of a sheet of paper.

Then list all your debts from smallest balance to largest balance. Pay the minimum payment on all of them except the smallest debt and destroy it. Then once its gone, add the money that you were paying on the little one, to the next little one (this is a little more because you are adding the minimum payment plus what you were paying on the little one). Continue in this method until each debt is gone and move on to the next one with a bigger amount to attack it with.

Just so you can see the example:

Weaponry: $1,500

Visa: $250...................................$25.00 Minimum Payment
MasterCard: $2,100..................$100.00 Minimum Payment
American Express: $2,500.......$120.00 Minimum Payment
Medical Bills: $10,200...............$400.00 Minimum Payment

Total Minimum Payment..........$645.00

So in this example you have $1,500 to attack debt with. $645.00 is going out for minimum payments and that leaves $855.00 to attack with. This means we can put $225.00 of that towards Visa and get it out of our life forever, then still have $630.00 left that we can put on Master card. After that month our new debt will look like this (will be different baring interest):

MasterCard: $1,370
American Express: $2,380
Medical Bills: $,9.800

Then attack it again the next month and have a blast crossing stuff off the list. The reason why this method gets criticized is because other people think that you should keep the debt with the lowest interest rate and therefore not to rank or pay them off according to balance but interest rate. The thing is I agree with them and they are correct mathematically. But I have realized that personal finance is just as much personal as it is finance.

The reason why this is a proven method is because it offers the emotional pat on the back that is NECESSARY in order to keep the passion and motivation needed to attack debt. You may have intensity at the beginning with doing the interest rate method, however, it is so much easier to lose that intensity when you are not seeing results. Its just like when a Shark tastes blood, he wants to attack more. The same happens when we start seeing results from attacking our debt.

Now, if you want to do some balance transfers or consolidation and get a lower rate on something that is fine with me. But the reason why I am not harping on that is because balance transfers and consolidation are just smoke and mirrors. The real issue here is the DEBT. And by you shifting your problem around tricks you into thinking that you are doing something when in actuality you are mistaken.

The way to get out of debt is to attack. It's going to take a half a year or more living on beans and rice, grilled cheese and ramen noodles. But it's worth it to be free. I was listening to a radio program and the host asked the caller who was a hundred thousand dollars in debt, "What would your life be like if in 3 years you had no more payments?" She had to use every bit of energy to respond over her overwhelming tears and sniffles and all she could muster was, "I can't even imagine what life would be like if that happened."

That broke my heart that she was in BONDAGE. This is serious stuff and it matters. It affects everything in people's life, and for this lady she was at the end of her road. She could not take being in this bondage anymore to the point that life was not life anymore.

I know things may seem bleak and overwhelming but chances are the reason why is simply that you need to get organized. Getting organized and putting a plan down like I am suggestion allows you to see the light at the end of the tunnel that isn't an on coming train.

I can't say this enough, if you need to attack debt don't get caught up and play around with the balance transfer games, just attack it with intensity and that is how you will obtain Financial Freedom.