The Snowball Effect

The snowball effect for paying off debt is a fantastic concept and very easy to understand.

Let’s say you have 5 recurring debts:

Debt Type	Total Debt	Monthly Payment
Mortgage	$150,000.00	$1,100.00
Student Loan	$100,000.00	$600.00
Car	$15,000.00	$350.00
Medical Bill	$10,000.00	$200.00
Credit Card	$10,000.00	$150.00

Looking at this chart, your lowest payment is your credit card. When you plan your budget, work into your budget an additional 10-20% to put towards additional debt payment.

·       Apply “additional payments” to your monthly credit card payment

o   Continue payments until your total credit card debt is paid off

o   You now have $150 plus the 10-20% surplus available in your budget, this now becomes your total surplus

·       Apply total surplus to your monthly medical bill payment

o   Continue payment until your total medical bill debt is paid off

·       Continue following this process for all your debts

This is the snowball effect It’s simple, yet extremely powerful. All it takes is a little planning.

BN Focus – Go to your Snowball debt calculator and enter in all of your debts. Then choose which debt you will eliminate first and begin your journey to becoming debt-free.