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8 in every 10 working Americans are in debt, including school loans and credit card debt. There are different ways you can avoid going into debt, but you first need to get out of debt. The best way to become debt-free is by using the snowball method. Here’s more about the debt snowball method and how it can help you become debt-free.
The debt snowball method is a way to help you reduce your debt strategically. With this debt method, you pay off your debts from the smallest to the largest debt you owe. As you pay off each of your debts, you gain momentum and continue to pay off each debt until you are debt-free.
You need to follow four steps to ensure the debt snowball method helps you achieve your goal of becoming debt-free.
Step 1: List all your existing debts from the smallest to largest, excluding your house payment. Your interest rate is not a factor in this situation, so don’t worry about arranging your debts in the order of your interest rates.
Step 2: Set your smallest debts aside and focus on the more significant debts. Take your debts with the highest balance and make the minimum payments on these bills.
Step 3: Look at your smallest debts and pay as much as you can on each debt.
Step 4: Repeat steps two and three until you pay off your debts.
More than 45 percent of Americans live paycheck to paycheck, and over 40 percent of Americans can’t afford an emergency that costs $400 or more. The total American household debt exceeds $12 trillion.
Americans are in debt due to varying factors, some of which you can avoid with proper strategies and discipline.
You may want the newest iPhone, a pair of shoes, or outfit, but you should always pay your bills first. A good practice for staying out of debt is understanding that just because you have the money to purchase an item, it doesn’t mean you can afford to purchase it. For example, you may have money to buy a brand new car, but if you still have household expenses and other bills to pay, you likely can’t actually afford a new car.
Some Americans go into credit card debt trying to keep up with the appearances of other people. No one enjoys feeling less than or left out, but not being able to afford a custom-build home or designer outfit doesn’t make you less of a person.
Emergencies happen whether you’re ready to handle the financial aspect of the emergency or not. Emergencies are often expensive and put you into a whirlwind of debt that can be difficult to conquer without a strategic plan.
Most Americans are in debt, but the good news is, you don’t have to remain in debt. Use the debt snowball method to help you conquer debt and gain control of your life.
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