A Simple, Effective Method

Although there are many approaches to debt elimination, my own experience with teaching has shown that the debt-snowball method, which arranges debts from lowest to highest balance rather than highest to lowest interest rate, can be an extremely motivating way to confront and eliminate debt. This method is simple. Arrange your debts from smallest to largest. Make the minimum payment on all debts each month except for the smallest one: on that one, pay as much as you can. Once it is paid off, roll the regular payment you had been paying on that debt to the next-largest debt until it is paid off. Continue the process until the payment "snowball" has grown so large it quickly knocks out debts that stand in its way.

The following example shows this method. The last line indicates that the total debt payment will always be $646, but as the smaller debts are eliminated, more and more of that amount is applied to the next-largest debt.