The Problem with debt is that you accumulate often and you as a debtor is the feeling that it is becoming more and more. And you could not pay off. That’s why Dave Ramsey has come up with the Debt Snowball System. Quite simply, it comes to explain the different debt items to eliminate the smallest of Items. A small example, before we later to be concrete, Suppose that a debtor has to post three different Debt. Debt A is 1000 Euro, debt-to-B 1500 euros and debt C 3,000 Euro. Now it goes to Ramsey, therefore, to use all of the debt with the most minimal amount and, in the case of the lowest debt-to-everything zupowern what is there. The goal: the lowest debt first to eliminate.
What is the Debt Snowball System?
Dave Ramsey thought of the Debt Snowball System. The Americans is a successful businessman and hosted a popular radio show. His System is to put always the most money in the lowest amount of debt. We are continuing our example from the introduction again: The conditions are that we have to pay for each debt at least 50 Euro per month post. And max, we have 300 euros. We use debt B and debt C with the minimum amount of 50 Euro and churning 200 Euro in debt to you to pay off as quickly as possible. And so the whole thing looks like: FOL
After five months, we have eliminated debt A. So now we have only debts to two creditors.
So, the debt works to pay off
so it is. Debt C still gets only 50 Euro in the month, although it is the largest Item. The rest of the 250 Euro hike is now closed in the repayment of debt b. FOL
here, Too, we have made it to five months, debt-to-B fully pay off. Two creditors are satisfied. Now we have to pay off only the debt debt C. we have now every month for the full 300 Euro. And it looks like this: FOL
Thus, we are then to nine additional months, free of debt, because we have always been very focused on a certain amount of debt to pay off. This is the Debt Snowball System.
criticism of the Debt Snowball System
You can see this procedure is also critical, because the to-be-paid interest are not taken into account. In the case of debt only the repayment of the principal does not play an important role (i.e., the amount that reduces the debt burden really), but also the interest payments (i.e., the amount that flows to the creditor, without reducing the debt burden). Dave Ramsey explains but also, quite frankly, that it relates to the psychological component, and its method is not mathematically the best.
The most Important thing is: The Debt Snowball method works psychologically. It is not the mathematically best, but the people feel using this method, according to Dave Ramsey and manage to pay off their debts. And that is ultimately the most important thing, or?
Read you can do this in his blog post. We find that the method can be worthwhile, nevertheless, when you have several creditors and Pay off the debt difficult.
Basic tips to debt pay off
debts are always stupid, so of course the first step to avoiding them. It is not clear, however, that it goes on and on and it is planned or unplanned, in the debt slips. Here it is important to create first an Overview on the debts. How high the amount is, and how high the interest rates are?
Then it is a question of the debt on a regular basis to pay off. It may also be advisable to installment payments to be agreed with the creditors. Best to consult with a debt counselor, if it is complicated or you are uncertain.
it is now Important to be able to the debt quickly to pay off, the interest payments eat up a. Also, it’s always nice to have no debt and a high cash flow generating. The Debt can help Snowball method by Dave Ramsey, certainly.
And here is more tips from us, to slip into debt. René wants to return: So you can give your child to the age of 18. nearly 90,000 euros from the state FOCUS Online René wants to return: So you can give your child to the age of 18. nearly 90,000 euros from the state
*The post “Instead of frustration and despair: A little Trick that makes the debt repayment easier,” is published by small money heroes. Contact with the executives here.
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