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Needless to say, life with debt can be daunting. It’s hard managing your finances, especially when you have debt hanging over your head. Thus, it’s mandatory to find a smart debt management plan and move accordingly.
Speaking of debt management plans, you’ll find a variety of them. However, not all of them would be as wonderful as others. Thus, you must be very careful when opting for one. In this article today, I’m going to highlight the debt snowball method.
It stands tall among the most popular and effective debt plans. Now let’s shed some light on it, what it is, how it works, its benefits, and its downsides. Have a look:
What is the Debt Snowball Method?
The debt snowball method involves paying off the debt starting from the smallest. Yes, you hit the smallest debt first and gradually move towards the next. It is like moving in ascending order, from the smallest to the second smallest and so on, so forth.
Benefits of the Debt Snowball Method
The debt snowball method is beneficial in many ways. For starters, it provides you with instant gratification. Staying motivated when paying off the debt is the most difficult thing ever. It’s one issue that more or less everyone gets to face. Yes, people lose motivation, but it’s not the same with the debt snowball method.
When you get done with debt even if it’s the smallest, you feel motivated for the other one. It provides you with a sense of achievement. Not to mention, it saves time as well. It cuts the debt repayment time in half, which is the primary benefit of the debt snowball method.
Drawbacks of the Debt Snowball Method
It’s indeed correct that the debt snowball method has a variety of benefits, but it has its downsides, too. One of the worst things about the debt snowball method is that it leaves the issue of the interest fee unaddressed. The main focus stays on the smallest to the next smallest debt and in the process, the interest fee is ignored.
That’s right, guys. Due to this issue, you often end up paying more money than you initially calculated and it is primarily the reason many people opt out of the debt snowball method in-between. Thus, proper research is mandatory before starting the debt plan.
Lastly, everything requires proper research and time. Paying off the debt is, of course, hard. It is something that requires discipline and commitment. Thus, be sure to stick to it and you’ll be just fine.