## Debt Snowball – The Accelerated Debt Payoff Method

The first time you hear “debt snowball,” you’re likely to wonder: What is it? I will tell you…

Did you ever see How the Grinch Stole Christmas — the classic cartoon version? And do you remember how the little dog-reindeer got stuck in a snowball that careened down the hill and got bigger as it went along?

That’s the same idea behind a debt snowball. The more balances you pay off completely, the more money you’ll have available to pay off each successive balance.

## Debt Snowball Explained

Let’s say that you have five different balances that you want to pay off. Naturally, each balance is being charged a different interest rate. And you will owe a different amount of money on each balance.

Here’s what you should not do:

If you have \$100 extra to put toward your debt each month, you should not divide the money equally and pay down each of your five balances by \$20 each.

This may feel good because each balance is decreasing — but it’s definitely not the most effective way of paying off your debt.

But which balance do you attack first? That’s the question.

## How to Decide Which Debt to Pay Off First

Usually, you will want to pay off the smallest balance with the highest interest rate. If your smallest balance does indeed have the highest interest rate, it’s a no-brainer. You pay off that balance first.

Then, after it’s paid off, you take what you HAD been paying toward that debt — add it to your debt snowball — and start throwing it at the next balance in line. Here’s a brief example:

Extra Money to Pay Off Debt = \$100

Debt #1: Minimum Payment = \$50

Debt #2: Minimum Payment = \$125

In this short example, you pay \$150 toward Debt #1 until it is paid off. You then take this amount and add it to the minimum payment of Debt #2. So \$150 + \$125 = \$275.

You now have \$275 per month to put toward Debt #2. As you can imagine, you will pay off this debt even faster than you paid off your first balance because your debt snowball is now much bigger.

Imagine how big it will be by the time you get to the fifth and final balance!

### Debt Snowball: Better than Consolidation?

Some will tell you that it’s actually more effective and less expensive to use the debt snowball method to pay off your debts.

This is because consolidating debt often has some costs associated with it: balance transfer fees, management company fees, etc.

If you can manage your own finances, and start your own debt snowball program, you may be able to reduce your debt — and ultimately become debt free — faster than you might imagine.

So what’s next?

You might consider searching Google for a debt snowball calculator. There are some free calculators out there that can help you figure out what order in which to pay off your debts.

## Christian Debt Reduction – How to Find Peace from Debt

For believers, Christian debt reduction is a big decision. You desperately want to get rid of debt and finally have peace in your life again. You know you need help, but you don’t want to hire just anybody. You want to hire a believer like you.

So where do you start?

First, it helps to understand the process you will likely go through. There are two options for Christian debt reduction: there’s debt consolidation and there’s debt settlement.

When you still have some breathing room, it’s more likely that you’ll try to consolidate debt, lowering interest rates and minimum payments in the process.

But when you’ve racked up so much debt that you can’t even make your minimum payments anymore, it’s likely that you’ll put together a plan for debt settlement.

## Christian Debt Reduction through Settlement

Debt settlement is a process where you stop paying your creditors and save the money you would normally pay them. When you have a certain amount saved up, you then approach your creditors to try to get them to settle with you.

Basically, when you settle, your creditor is agreeing to accept a certain amount of money less than what you owe. Sometimes this can be less than 50% of what you owe.

While some individuals attempt to manage this process themselves, it is strongly advisable to hire a Christian financial organization that is experienced with these kinds of situations. They will be able to manage the process for you and make sure everything is happening according to your plan.

## Pay Off Your Debts Faster and Find Peace Again

Unfortunately, when you have crushing debts that you can’t seem to pay off, it can affect you physically, emotionally, and spiritually. Many people have trouble sleeping, get angry, and distance themselves from God.

One of the reasons Christian debt reduction organizations exist is to help believers find peace and draw close to God again. Many times, this can only happen once a certain level of financial stability is achieved.

Did you know that God actually made provisions in His law for people who fall into debt?

Every seventh year was a rest year where you could actually take a break from repaying your debts. Every 49 years God commanded that a Jubilee be kept. During the Jubilee, all debts were forgiven!

Of course, there’s not a country in the entire world that acknowledges or follows this Biblical precept. But wouldn’t a Jubilee be awesome? :-)

Thankfully, there are many believers who sincerely care about how debt is affecting Christians. And they are committed to helping Christians become debt free.

One such organization that I’m aware of is Trinity Financial Mission. It is a non-profit company dedicated to helping Christians find relief from debt.

This is the same company that my brother and his wife are using. They are currently following a debt settlement plan. My brother told me they got their first debt settlement offer from Citi the other day. Woohoo!

It was hard for my brother to admit that he had accumulated more debt than he could handle. It was hard for him to admit that he needed help. It’s hard for anybody, Christian or not.

But if you have reached a point where you recognize the severity of your debt problem, then I strongly recommend getting Christian debt reduction help. Often it’s just a matter of filling out simple web form or picking up the phone and making a call.

## Car Debts – Driving Away from Debt

Car debts often eclipse a person’s credit card balances by a long shot. It’s not uncommon to have \$30,000 up to \$60,000 or more in car debts.

Worse, monthly payments can exceed \$1,000 a month — almost as much as a small rent or mortgage payment! This can put a huge strain on your ability to meet all your monthly obligations.

Obviously, if you can reduce your car payments or get rid of them altogether, then it will be better for you financially.

### Pay Just a Little Bit Extra

One way to get rid of your car debts is to pay off your loans earlier than expected. It’s actually not that hard to do. Simply pay an extra \$10 or \$20 a month.

You won’t miss such a small amount of money, but your loan balance will step down faster. You may be able to shave off a few months of payments over the life of the loan.

Probably one of the fastest ways to make your car debts go “poof!” is also the most difficult emotionally. That is to downsize your driving lifestyle.

Instead of driving a new Acura, sell it and get a used Honda. Instead of driving a new Lexus, sell it and get a used Toyota. Instead of driving a new Cadillac Escalade, sell it and get a used Toyota 4Runner.

You get the idea.

By selling one of your vehicles, you can instantly wipe out thousands of dollars in debt, maybe even tens of thousands of dollars. Then, when you purchase a used vehicle as a replacement, your car loan may only be one-fifth or one-third of the old loan amount.

This will not only reduce your debt, but reduce your monthly payments as well — both really positive things if you’re trying to become debt free.

### Become a One-Car Family

For most of my 10 years of marriage, my wife and I (and kids!) have shared one car. This is not always possible, but we’ve been able to make it work during different periods of time.

If you have two car loans on two different cars… and you sell one car… you may erase half of your car debts in one fell swoop!

And I can tell you from personal experience that it’s WAY easier to take care of one car compared to two. It’s half the oil changes, half the repairs, etc.

### Live Closer to Work

By living closer to work, you may not reduce your car debts, but you will save money on gas, insurance, maintenance, and repairs.

If you live close enough, you may even be able to ride a bike or walk to work. Or carpool.

Some brave individuals have moved closer to work and gotten rid of their cars for good. They use only human-powered and public modes of transportation. And it can work well for certain people.

Others who live in warmer climates may want to trade in their car for an inexpensive motorcycle or motor scooter. Again, this is not for everybody, but it works well for some.

### Car Debts Be Gone!

No matter what angle you take, you can quickly get in a better financial situation by eliminating or reducing car debts. Thankfully, once you get over the emotional resistance you may have, it’s actually easy to do.

Here are the four strategies: Pay off your loan faster, downsize your car, become a one-car family, and/or live closer to work. Choose the approach that works best for you.

## Currency News – Time to Take on Debt?

The currency news mill is working overtime.

There have recently been more predictions of the imminent collapse of the U.S. dollar. And for good reason. According to some sources, a U.S. default is now certain.

Other sources say that the financial oligarchy — the true men in power in the U.S. — are preparing to drive the value of the dollar down by 30-50% in the next 12 months.

I’ve actually already seen the images of the plates for a new North American currency that could be released by the end of the year (2010). There are no dead presidents on these bills, but rather pictures of each of the founding members of the Federal Reserve.

How’s that for creepy?

No matter whether or not the rumors of a new currency are true, the future of the dollar isn’t looking good. And if it continues to decrease in value, it’s going to spell trouble for Americans. Which is why I think you have to ask yourself…

### What If the Currency News Is True?

If the currency news is true, then that means our buying power is going to decrease during the coming months. Which means that we will not be able to buy as many products and services with the money we earn.

It could also mean that your income will go up. But this will only be an illusion of progress. While your income may increase, it most certainly will not increase as quickly as the prices of goods and services will increase.

Now let’s see how this relates to getting out of debt.

Your debt is essentially a fixed number, assuming that you are not incurring debt and you are making all your minimum monthly payments.

But in an inflationary situation, your income may be going up, as well as the prices of everything you normally buy.

This means that it will actually be easier to pay off your debt later with dollars that are worth less. I have read of stories where people paid off their homes in a just a few short years once hyperinflation kicked in.

So if I expect that we will see rapid inflation this year, it doesn’t make much sense to pay down my debt a whole lot. It makes more sense to wait and pay back the debt with cheap dollars that are easily obtained.

### Protect Yourself from Inflation

In the mean time: I suggest you use the dollars you have right now to hedge against inflation. In other words, buy tangible goods… things that you think you will need this year and next.

Personally, I’ve used some zero-interest loans to acquire physical goods. I’ve done this with the expectation that the goods themselves will be worth more than dollars will be worth in the near future.

Also: I’m buying gold and silver. Owning precious metals will protect you from inflation in the months and years to come. I have already bought silver myself, and I believe this was a wiser way to spend my money than to pay down my debt.

This is just what I did, and it’s not intended to be financial advice, nor should it be considered as such. You will have to do your own research and due diligence before making any financial decisions.

Staying on top of the currency news is always a little bit discouraging… and exciting at the same time. I hope you’ve found this information helpful and interesting.

## Credit Card Debt Reduction – Seven Methods Revealed

Getting a credit card debt reduction is not always easy, but it can be done. Naturally, some methods are less stressful than others. Let’s look at the easy options first.

### Ask for an interest rate reduction first.

One of the first things you should do is call up each of your credit card companies to ask them to reduce your interest rate. Ask them if they have any better rates available and, “Is this the best you can do?”

By getting your interest rate lowered, you will automatically pay off more debt every time you make a payment. Less will go to interest and more will go toward paying down your principal.

### Consolidate balances onto low-interest cards.

Although it’s not always possible, you might consider consolidating two or more balances onto a low-interest credit card. While you may pay a balance transfer fee, this could be off-set by the lower interest rate.

The end result is you get a lower interest rate, which makes it easier to pay off your debt faster.

### Pay off high-interest balances first.

In many cases, it makes the most sense to pay off your highest-interest cards first. Take whatever extra cash you can afford and use it to pay down your highest-interest balance.

Once you pay off this balance, you will have even more to pay down your next highest-interest balance. And so forth.

### Use lump sum payments like tax refunds to pay down principal.

Many families will get at least one lump sum of money each year, usually in the form of a tax refund, sometimes in the form of an inheritance or performance bonus.

Rather than using that money to buy a new doodad or gadget or toy, use that money to pay down the principal of one or more credit cards.

By using your windfall in a wise and responsible way, you will quickly see a significant credit card debt reduction. You may even pay off one of your cards entirely and get to enjoy more cash flow every month!

### Put your credit cards in a Ziploc bag of water… and freeze them!

One of the big reasons so many good people struggle to get out of debt is because every time they make some progress, they put more debt on their credit cards.

The temptation to use credit cards is just too easy. And you’ll never make long-term progress if you keep using your credit cards while you try to pay them off.

One technique is to simply remove your cards from your wallet or purse and place them in a file at home. But if the temptation to use them is still too strong, you can put them in a Ziploc bag full of water… and freeze them!

By doing this, you will not be able to use your credit cards whenever you feel the compulsion to buy something. You will actually have to pull the Ziploc bag out of the freezer and let it thaw.

Of course, this may take a few hours. And by then, you may have cooled down yourself — and no longer feel the need to buy whatever it was you wanted.

All of these methods are relatively painless. Anybody with enough self-control and self-discipline can do them. But if you’re really in a pinch… and you’ve got to get a credit card debt reduction fast… then there are a couple of more painful methods.

### Hire a debt reduction and consolidation service.

There are many debt reduction and consolidation services that will create a debt repayment plan for you and deal with the credit card companies on your behalf.

This is the route my brother and his wife chose to go. They hired a company that figured out how much they could afford to pay against their debt each month. They then used this figure to create a debt repayment plan.

During this time, my brother and his wife stopped making payments to the credit card companies. They began to get calls from collection agents. But they expected this.

Fortunately, the company they hired has been able to bear the brunt of the calls and negotiate debt reduction deals with the credit card companies.

Thankfully, my brother and his wife are making good progress now. And even though they are still in debt, they finally see the light at the end of the tunnel. They have hope.

### Try to get a credit card debt reduction yourself.

Although it’s usually not advisable to do this, you can try to negotiate a credit card debt reduction yourself.

Unfortunately, most credit card companies are very experienced. They’ve heard all the sob stories. And they won’t be very willing to forgive any of your debts.

Which means you will have to stop making payments if you want to have any kind of leverage in the negotiation. This is the same process you would go through if you were working with a debt consolidation company… but this time you’d be handling all the phone calls and negotiation yourself.

It’s not necessarily the way I would do it; but I have heard of some brave individuals trying to go it alone.

No matter whether you hire a company or not, it’s fairly common for people to get credit card debt reductions of anywhere from 40% to 60%.

So if you had a balance of \$10,000 on one card, you might see it reduced to as low as \$4,000 and maybe as high as \$6,000. In the end, you have to decide:

Is all the stress worth it? Is it worth it to wreck your credit score to reduce your debt? And could you possibly accomplish the same thing by choosing some of the easier, less stressful methods first?

### Wrapping It All Up

If you’ve still got a source of income, and you can discipline yourself, then definitely choose some of the less stressful methods first. Try to get your interest rates reduced. Consolidate balances onto a low-interest card. And so on.

If, on the other hand, it is literally impossible for you to make all your minimum monthly payments, then you will probably be forced into choosing the more stressful method of hiring a debt consolidation company — or trying to negotiate with the credit card companies yourself.

Choose wisely. And I wish you all the best as you seek to get a credit card debt reduction.