The debt snowball method has been around for a while. It was popularized by personal finance guru Dave Ramsey.
The premise of the debt snowball is that if you have more than one instance of consumer debt (car loan, credit card etc.) you should pay off the smallest balance first, not the one with the highest interest rate. The idea here is that a small victory on a small balance will give you further incentive to keep working on paying off the next bigger debt. Additionally, you can apply the monthly payment that was going to the first small balance toward the next debt with its requisite payment allowing you to crush each debt with larger and larger monthly payment amounts.
Vertex42.com has a great Excel based snowball calculator that can show you how fast and how much interest it will cost to pay off all your debts. You can select the Snowball method as described above or the “blizzard” method which pays off the highest interest loans first, or a custom method you define. This is a handy tool for planning your strategy of escaping debt.
Vertex 42 has a lot of Excel templates and instruction if you are new to Excel or want to brush up on your skills/knowledge.
This entry was posted in Retirement Stuff by Rich