How To Get Your Kids To Start Saving
In Dave Ramsey’s book, ‘The Total Money Makeover’, he brings up a really interesting theory about how to get out of debt. It’s called The Debt Snowball. The theory works for people that are trying to get out of a few channels of consumer debt.
While it’s opposite to some conventional thinking about debt, it is an interesting concept that really helps out certain people. Let’s break it down:
How the debt snowball works:
• List all your debts, from lowest balance to highest balance
• Decide how much money you can afford to pay each month towards debt
• Pay the minimum amount on all of your debts, except the one with the lowest balance
• Use EVERY SPARE DOLLAR on the debt with lowest balance
• After that debt is wiped out, do not change the monthly debt spend, and continue on to the next lowest balance
What it’s doing
Rather than go after the accounts with the highest interest, you’re going after individual debt channels. The mental victory of wiping out a credit card, loan or payment cycle is massive for a lot of people.
While technically, paying off the highest interest accounts is going to save you some money, if the snowball technique gets you there faster than the conventional method, you’re saving a TON of cash.
Try this simple debt-buster soon, as see if you reap the psychological benefits.
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