Ways to Save Money
In these hard times, money is hard to come by so you should know how to save it until things get better. Since it is a balancing act that is somewhat challenging, here are a few ways that can teach you how to save money. If you don’t want to lose your home like a lot of Americans have over the past year, you have to kill your debt first. You do that by calculating how much money you spend in a month and then see where the budgets can be made so there is money you can use to pay ...
Five Practical Ways to Save Money for Students
It can be hard to think of ways to save money especially for students since they don’t have their own money yet. This is because at times, for all the expenses while on campus, there is barely left to save. Although it is hard, it doesn’t mean that it is impossible for students to save money while studying. All they need is to develop good time management skills, strict budgeting, and practicality. If you are one of those who are thinking of ways to save money while on campus or even before you enter one, here are some of the ...
Six Simple Ways to Save Money
No matter where you look at it, there will be always ways to save money if the person has the will do so. If you are one of those who are trying to come up with ways to save money in this unstable economy, it is best to start with developing a simple lifestyle. When you are able to do this, the rest will follow. But, if you are one of those who are not sure where to start, here are some eight simple ways to save money. 1. Cut down on grocery or shopping sprees. Although buying groceries is a ...
Save Money Without Feeling Poor
Yes. You are feeling the economic crunch. Times are hard and you are finding it hard to even make both ends meet with the rising costs of basic necessities and the fact that you lost one of the part-time jobs that you are holding. This is the common scenario that people, not only in the US, is feeling. They may not have lost their jobs but they have certainly found it hard to earn extra. Can you blame them then if they look for ways to cut costs and save money? Although it looks like a pretty daunting task, it’s not ...
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How to Pay Off Debt Fast With Debt-Snowball Technique – A Case Study
July 4, 2010 by Best Ways To Save Money
Filed under Personal Finance
Debt-snowball technique is a debt relief solution commonly introduced to people who are facing debt problem and want to see their debt goes off fast. It will not erase debt magically, but this solution that requires debtors to pay their extra dollars toward the smallest balance works psychologically that motivates them to work toward clearing their debt. Below is a case study that shows you how the technique is used to handle the payment of multiple debts and loans.
In our case study, Jane owes the following amounts of debt:
Credit Card A - $1500 balance - $125/month minimum
Credit Card B - $3000 balance - $150/month minimum
Credit Card C - $200 balance - $25/month minimum
Personal Loan - $3000 balance - $200/month minimum
Car Loan - $2000 balance - $150/month minimum
Jane earns $2500 a month, so after the deduction of her monthly expenses, she has some additional fund that can be devoted to repayment of the amount she owned. After reading the debt management tips and strategies, she has decided to follow the Debt-snowball Technique to make her debt goes faster with the additional fund that can squeeze out from her monthly income.
Under the debt-snowball technique, Jane has to list down the balances in the ascending order with the small amount on top of the list. If two balances have the same amount, then the balances with the higher interest rate will be listed first. In this case study, we assume the cards' interest rates are higher than the personal loan. So, Jane's list of balances is as below:
1. Credit Card C - $200 balance - $25/month minimum
2. Credit Card A - $1500 balance - $125/month minimum
3. Car Loan - $2000 balance - $150/month minimum
4. Credit Card B - $3000 balance - $150/month minimum
5. Personal Loan - $3000 balance - $200/month minimum
After deducting her monthly expenses, she has an additional $100 to be devoted to the repayment of debt. Jane will pay the minimum payment on her debt listed in item 2 to 5 and apply the extra 100 dollars on the balance of item 1, which she will pay $225/month for credit card C. In this case study, we assume that all credit card interest rates are 18%. Whereas, personal loan has15% of interest rate and car loan interest rate is at 6% per annum.
By doing so, Jane will settle the balance of credit card C after 3 months. At the 4th month, Jane applies the $225, which is used to pay the Credit Card C on Credit Card A. By payment $350/month on item 2, Jane will take another 5 months to get rid of debt on item 2.
On the 10th month, the car loan balance remains about $570. At this time, Jane has successfully gets rid of 2 debts. Now, she applies the $350 + $150 = $500 toward her car loan and successfully pay it off on the 11th month.
After clearing her car loan, she has extra money for payment on next amount owned. Without reducing the total amount used to pay her debt, she applies $650 on credit card B, which the balance at the time is about $2030. Jane takes 4 months to settle it.
Jane is getting excited because in less than a year, she manages to settle 4 debts. The motivation keeps ongoing. Now, with only one balance to go for, and the balance of the personal loan lefts about $910, it took Jane another 2 months to get rid of it.
Summary
This is the power of debt-snowball technique. If Jane just pays the minimum payment, her debt will take years to be settled, but by using this technique to clear the balance with minimum amount one by one, Jane settles her debt in 13 months.
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About the Author:
Visit Cornie Herring at http://www.studykiosk.com/CreditBasics to find more debt relief resources on the options available for you to get rid of debt. Learn from Cornie on the techniques to pay your credit card debt fast.
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