These tips are for getting out of debt. I came across the snowball tip when listening to Dave Ramsey, so I can't take full credit. First of all, create a budget that allows for a reasonable standard of living or else you won't stick to it. Then, focus on paying off the debt with the smallest balance by paying every last extra cent you have toward it. Once that's paid off, focus on the next one with the lowest balance. You'll be able to apply the amount you were paying on the first bill in addition to what you normally were paying. Keep this up until everything (maybe even your house) is paid in full and don't accrue any more debt in the process.
By Michelle from Lompoc, CA
It might be a good idea to pay off the debt with the highest interest rate first, rather than the one with the smallest balance. Mathematically, this saves you money in the long run.
Dollface, just wanted to say a big-time thanks for getting the word out about Dave Ramsey and deep-sixing debt. Good luck with your own dough. Way to go, baby! (01/09/2007)
The deal with paying off the smallest first with Dave Ramsey's method is the emotional satisfaction you get by paying off the smallest debt first. Then, you gain a foothold and you have one less monkey on your back a lot faster than if you go for the interest rates. (12/06/2008)
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