As this is a new year and many people think to get out of debt, I think that it is time to refresh which means the effect snowball; as I said in my other article, the snowball effect was popularized by Dave Ramsey and other gurus of personal finances as a way to manage our payments of debt and leave them faster. I will review with you a step-by-step example. Bring all your debts before that you can optimize your payments, you have to know how much must, to who need you and at what interest rate. Don’t have much equipment, only collects this information for each debt 1. Amount you still owe 2. For even more details, read what music downloads says on the issue. 3 Minimum payment. Rate of interest example: 1.
amount that you still must = $700 2. Minimum payment = $ 20/month 3. Interest rate = 8.5% If you have several debts, is the time enumeres it all. Putting your debts in order how should sort your debts? Here is when all the gurus are fighting: Dave Ramsey is in favour of putting the debt that you owe less than the first. He believes that this will generate an early satisfaction and people shall continue to apply the system.
Because you paid your debt smaller than fast, you want continue with the others. Other people are advised to go for interest paid. Those that have greater interest first, those of lesser interest later. I have placed different alternatives, in the worksheet as the lowest balance shown in Figure first the first highest interest the order that you entered in the table not Snowball the highest Custom or the lowest Custom view explanations of each one in the worksheet for our example, we will use the Council’s Dave Ramsey, balance lowest first. Debt debt remaining payment Min. Personal loan interest rate 1100 100/month 10% 2000 credit card 180/month 18% credit card 2 3800 250/month 18% Auto 15000 400/month 6% Total 930/month creating the snow ball you’ve seen what happens when you toss a snowflake from the top of the mountain.