If you've got several credit cards with outstanding balances, or some credit cards as well as other loans (such as a car loan) you're probably wondering how you're ever going to get them all paid off.
I can understand completely.
I used to be in the same position, wondering where I was going to get the money to pay the minimum payments every month, let alone get them paid off entirely.
Fortunately, I came across a method that made a big difference in how quickly I could pay off the debts.
The method I found is called the Debt Snowball.
Let's look at how it works and how it will help you get out of debt quicker.
The idea behind the debt snowball is that you focus on one debt at a time and get it completely paid off.
You still continue making minimum payments on all the other credit cards and loans to keep them in good standing, but instead of putting a little extra towards several different debts, you put all the extra money you can toward one.
There are two schools of thought on how to choose the first debt to tackle.
Some people feel you should start with the debt that has the highest interest rate, while others think you should start with the one that has the lowest balance.
Either way will work but which is best will depend on what motivates you.
If saving more money in the long run is important, you should start with the debt that has the highest interest rate.
If seeing progress by paying off debts faster gets you more excited, start with the debt with the lowest total owed.
When you pay your bill every month, put every possible cent you can towards paying off that first debt.
When that one is fully paid off, take the payment that you were making on it, add it to the minimum payment on the next debt in line and start paying it off with that amount every month.
When that one is paid off, move on to the third, and so on.
The "snowball" effect comes into play as you pay off each debt because the payments snowball into the next one.
Personally, I prefer the method of paying off the lower debts first even though it costs more in interest, because you see the results quicker as each debt is paid off.
I can't tell you how motivating it is to be able to scratch that debt off your list when you make the final payment!