6 Steps to Reduce Your Debt

Dave Ramsey, a financial author has taught the debt reduction method known as debt-snowball method. It is a form of debt management that usually applied for revolving credits.Here are the steps on how to reduce your debt by using debt-snowball method:

1. You have to list all debts according to the smallest balance to the largest balance. However, if two debts are very close in amount owed, the debt with a higher interest rate would come first. A, B, C, D list for example.

2. Pay the minimum payment on every debt.

3. Find out how extra money can be paid for the smallest amount debt (A).

4. Pay the minimum payment on every debt plus the extra money for the smallest amount debt (A) until it is paid off.

5. Then, add the amount of money used to settle the debt A (minimum + extra) for the next debt in order i.e. the second smallest debt (B) until it is paid off.

6. Repeat these process until all debts has been paid in full.

That’s all.