Let’s get real
There is a real simple answer to this question. Have a lot of money. Or at least make more money than you spend. But lets assume that you already have a decent amount of money coming in, and you already have your spending situation under control. Well in that case, a snowball would be your best answer.
The Snowball is where you budget a sum of money that you will use to pay extra on one of your cards. You then make the minimum payments on the rest of your cards. When your first card is paid off, you roll the snowball + the minimum payment for that card into the next card payment and you continue like dominoes. J
ust like rolling a snowball on snow, your payment will continue to grow and add the minimum payment from the other cards. You can even keep it going after your cards are paid off and pay off your house and car. There are only 3 rules to follow to make this work flawlessly.
- Don’t spend any more money on credit cards
- Only spend cash
- Don’t spend any more money on credit cards.
Another variation of the snowball is the avalanche. In this one, instead of using a set snowball, you put all your available cash into paying off the card of the month, and then roll that into the next card. It’s much quicker, but not nearly as easy. When you spend all your cash on paying a card, its easy to call nonemergency situations emergencies and make a poor decision to use a credit card again. It’s not ideal to use credit cards while you are paying them off so if you are the type of person who doesn’t have good discipline, it may be better to just go with a larger snowball.
So fast can this work? Let’s see.
Lest say for instance we have 4 credit cards with varying balances and we are able to save $300 per month to use for the snowball. It could look something like this.
| COMPANY | BALANCE | MINIMUM PAYMENT | MONTHS TO COMPLETION |
| COMP ONE | 2500 | 56 | 44.64285714 |
| COMP TWO | 5789 | 120 | 48.24166667 |
| COMP THREE | 3300 | 77 | 42.85714286 |
| COMP FOUR | 12837 | 350 | 36.67714286 |
The “months to completion” is simply the balance divided by the minimum payment. Because you will not focus on interest using this plan, you want to attack the lowest months to completion first and then move on to the next lowest number.
This is what it would look like now. You will add your Snowball to the first minimum payment and proceed to pay off the card. You then roll that amount into the next minimum payment and continue until you are out of credit card debt.
| COMPANY | BALANCE | MINIMUM PAYMENT | MONTHS TO COMPLETION |
| COMP FOUR | 12837 | 350 | 36.67714286 |
| COMP THREE | 3300 | 77 | 42.85714286 |
| COMP ONE | 2500 | 56 | 44.64285714 |
| COMP TWO | 5789 | 120 | 48.24166667 |
This is what it will look like.
| COMPANY | BALANCE | MINIMUM PAYMENT | MONTHS TO COMPLETION | SNOWBALL | NEW MONTHS |
| COMP FOUR | 12837 | 350 | 36.67714286 | 650 | 19.74923077 |
| COMP THREE | 3300 | 77 | 42.85714286 | 727 | 4.539202201 |
| COMP ONE | 2500 | 56 | 44.64285714 | 783 | 3.19284802 |
| COMP TWO | 5789 | 120 | 48.24166667 | 903 | 6.410852713 |
Once you add up the New Months column, you will see your debt can be paid off in 33 months. And keep in mind that each month you are making payments on the other cards, so their balances will be decreasing, even if not very fast.
This not only works with credit cards; it can work on cars, homes, and loans as well. Just pop you data into excel and work it out so you can see for yourself. Not good with excel? Contact us for a free template that can be used to add your debt information so you can see how this strategy can help you.