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THE DEBT SNOW BALL

THE DEBT SNOW BALL. Think about how a snowball starts, as it begins to roll down a hill . I t is initially small and travels slow.   However with each rotation, it absorbs additional snow and grows bigger and faster , becoming a boulder-like in size and force . .

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THE DEBT SNOW BALL

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  1. THE DEBT SNOW BALL
  2. Think about how a snowball starts, as it begins to roll down a hill.It is initially small and travels slow.  However with each rotation, it absorbs additional snow and grows bigger and faster, becoming a boulder-like in size and force.
  3. What is the snowball effect? It’s a method used to get rid of all your debt one step at a time.
  4. BEFOREyou start the plan Be current on all your monthly bill payments Have a emergency fund of $1,000 minimal
  5. You are ready to start snow balling 1. List your debts smallest to largest by amount owed Example: (do not included interest rates) $400 medical bill (payment of $40 a month) $3,500 credit card debt ($65 payment) $7,000 car loan ($135 payment) $10,000 student loan ($96 payment)
  6. 2. Pay minimum payments on all of the debts except the smallest one Medical bill $400 (payment of $40 a month) You have learned to save an extra $400 each month to go towards your debt. You are able to pay $440 a month on your medical bill (the $40 payment plus the $400 extra) The medical bill will be paid off in a month.
  7. After the medical bill is paid, you have a extra $440 monthly, take the $440 and put it towards your credit card debt. Keep in mind: 3,500 credit card debt ($65 payment) You will now be able to pay $505 on your credit card monthly ($440 plus the $65 minimum payment). The credit card will be paid off in less 7 months
  8. After the credit card is paid, you have a extra $505 monthly, take the $505 and put it towards your car loan. Keep in mind: $7,000 car loan ($135 payment) You will now be able to pay $640 on your credit card monthly ($505 plus the $135 minimum payment). The car loan will be paid off in less 11 months
  9. After the car loan is paid, you have a extra $640 monthly, take the $640 and put it towards your student loan. Keep in mind: $10,000 student loan ($96 payment) You will now be able to pay $736 on your student loan monthly ($640 plus the $96 minimum payment). The student loan will be paid off in less 14 months
  10. RECAP $20,900 Debt $400 medical bill ( 1 month paid off) $3,500 credit card debt (7 months paid off) $7,000 car loan ( 11 months paid off) $10,000 student loan ( 14 months paid off) You PAID your debt off in 4 years You now have $ 736 monthly to do whatever you want !!!!!!!!!!!!!!!!!
  11. Resources http://www.daveramsey.com/blog/how-the-debt-snowball-method-works?atid=davesays
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