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How to reduce or eliminate debt




There are plenty of strategies you could use to reduce or eliminate debt. One debt reducing strategy that has worked for hundreds of people is the debt snowball strategy. To reduce or eliminate debt with this debt strategy, write down all your debts and the pay-off amounts on a sheet of paper. Now work hard towards paying off the lowest pay-off amount and then cross off this payment from the list. Now work on paying off the second lowest pay-off amount in the list.

How debt snowball strategy works
  • List all your debts on a sheet of paper from the smallest pay-off to the largest.
  • It is important to plan to pay at least the minimum on all your debt accounts. You do not want to get hit by late fees and a hike in interest rates.
  • Check to see how much you have saved to pay off your debts.
  • Pay the minimum payment as listed on your lowest pay-off debt and then apply the extra money in paying off the debt.
  • Once you pay off your lowest debt, work on reducing or eliminating your second lowest debt.
  • Repeat the above until you have paid off all your debts.
Here is an example to consider:

  • Credit Card A has a balance of $2000 and minimum payment of $70
  • Credit Card B has a balance of $1500 and minimum payment of $50
  • Credit Card C has a balance of $2500 and minimum payment of $90

Consider you have saved $350 in the current month to pay off your credit card debts. If you are applying the debt snowball effect strategy, credit card B is the one with lowest pay-off amount and needs to be addressed first. So plan on paying minimum payments of $70 and $90 for credit cards A and C and pay the remaining $90 towards credit card B. Once credit card B is paid off, consider paying off credit card A and then credit card C.

Slight variation to debt snowball strategy
If you have credit cards with varying interest rates, consider paying off the credit card with the highest interest rate and work your way towards paying off the credit card with the lowest interest rate. Paying off high-interest credit cards will help you save thousands of dollars in the long run.

Which method to use
We have listed above two debt reducing strategies that work well for most people seeking shelter from credit card debt. The snowball method is for people who would like to see their credit card debt being paid off and stay motivated to pay off all other credit card accounts. Others can stick with the variation method to save thousands of dollars in interest.

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