There are various methods of getting out of debt, the one I like best is the Debt Snowball. It is simple, and provides a quicker sense of accomplishment. Dave Ramsey is the primary advocate of the debt snowball.

So what is it? Well, before I get into the details, I first want to encourage you to make sure you have at least $1000 in the back before you start paying down your debt. This should be used as your emergency fund. Always keep that $1000 in the back so if you have an emergency, you won’t create more debt in taking care of the emergency.

Basically, it is paying the lowest balance first.

If you are seriously trying to get out of debt, you’ve already heard of Dave Ramsey, and especially if you are reading this blog.

Dave is a straight forward, no-holds-barred, tell you like it is kinda person when it comes to helping people get out of debt. He was once in debt so he speaks from experience. He has decades of experience mentoring people to get out of debt and live debt free. His background is not just from experience but is also Bible based by stating “The borrower is slave to the lender” Proverbs 22:7.

He hosts a daily radio show as well as a broadcast each weeknight on Fox Business News and encourages listeners who have become debt free to call in and scream “I’m/we’re Debt Free!!” as an inspiration to others who are working toward debt freedom.

Some people love him others hate him, either way he is absolutely determined to get you out of debt, and so am I.

I too have been in debt, and although I did not used the debt snowball to get out of debt (didn’t know about it back then) I am now debt free. I also believe the debt snowball is the best way to getting out of debt.

So as I mentioned earlier, it is the process of placing your smallest debt first and working your way down to the highest debt.

How do you do this?

Take all your bills, not your living expense bills like water, electric, utilities, house, food, etc. and list them, from lowest balance balance to highest balance

Pay the minimums on all the bills except the first, and pay as MUCH as you can on that one until it’s gone. Usually, this smallest debt is $200 to $600 dollars, and once it is paid off, you have an quick sense of success. That is the whole point of this process. Small victories.

Continue to the second bill, adding the amount you paid on the first before it was paid off and pay that one, hence picking up more dollars each time you pay off a bill and placing those dollars on the next bill (snowball effect)

Do this until the last bill is gone. Now keep in mind it is not just about the debt snowball process, you must also be working a budget and cutting back on spending all at the same time, see Money Management aka Cash Flow and How to Get Out Of Debt.

There are some pros and cons of the debt snowball, I find the pros out way the cons but here they are:Pros:

Easy to set up

Easy to follow

Many small victories

Cons:

Overall, more interest paid then with other methods, however, I have found other methods are harder to stick to.

With that said, as Dave says, this isn’t about the math, it is about the forming of a habit of paying off debt. It reinforces the habit by giving early positive results.

As with anything you must stay focused, and commit to follow it through to the end. The small victories and success of paying off that first small bill helps early reinforcement that it is working.

Being debt free is a life time commitment, not just a short term solution. Stay focus and you will be successful.

Goal – Dictionary.com defines it as: “the result or achievement toward which effort is directed; aim; end.”

Goal, intention, objective, destination, target, mission. No matter what word you use, it is a point in your future that you aim for success.

We have all set goals, we have successfully achieved many and we have all not met some of the goals we set for ourselves.

Goals are important both professionally and personally as they are a stake in the ground that we (or your employer) set to encourage growth and forward movement.

It has been said that most people believe in setting goals, however only about 3% of us actually set and write down goals for our personal life. There are many reasons for this; fear is very near the top of the list.

Most people who don’t set goals are afraid they will not meet the goals they set. They don’t want to fail. Yet, I think dong “nothing” is worse than trying to do something and missing the mark. It is always better to attempt to improve even if you fail, than stay stagnant as life passes you by.

We have all set goals like “I am going to lose weight” or “I am going to stop smoking” or “I am going to get out of debt.” What ever it is you feel you need to improve, you have probably set a goal about it. Or have you?  Have you really set the goal to the point where it is attainable? It is safe to say, “I am going to be debt free” you haven’t really set a goal; you have just made a statement.

Goal setting is about being specific to what you want to achieve. Draw a line in the sand.

Be honest with yourself, look at your debt and your income, determine your behavior change and commit. Set your goal, write down your goal as well as a plan to achieve it. For example your goal should read something like: “I will pay off $18,000 by June 1, 2008. I will do this by using the money that I saved by not eating out and putting those dollars on credit card debt” Be specific. How much will you pay off, by what date, and how.

Write your goal down on 3×5 cards and place them in multiple places around your environment. On the refrigerator, bathroom mirror, visor in the car, edge of your computer screen. When you see it, read it out loud as well as to yourself, positively reinforce your goal to yourself, remember PMA – Positive Mental Attitude.

Once you have your goal set, tell someone close to you. Now this is very important.  When I say someone close, I don’t mean your spouse, after all you two are already in it together. Tell someone that is close to you, friend, parent someone who is not directly related to the debt, who you trust. By telling someone else what that goal is, you are placing accountability on yourself. You are making that goal real. It turns a general statement into something you must take action on and be accountable to yourself as well as admitting to someone else the status of your goal.

Set a goal to pay of a specific amount of debt by a certain date. Living with the stress and fear of debt is far more risky than setting a goal to begin your journey down the path toward financial freedom.