What is the Debt Snowball Debt Reduction Plan?

By Mark Loy

The only criticism toward Dave Ramsey's method for achieving financial peace is that it is to conservative. It would seem that this could be agreed upon but unfortunately most American's do not have the discipline that it takes to pay off their credit card every month and the result is Dave Ramsey's extremely conservative approach to debt.

This article will be going into detail about the debt snowball method of paying of debts. The debt snowball method for paying off your debts is probably the most basic and most important step in someone's quest for financial peace.

When implementing the debt snowball method the plan is to organize your debts so that you can setup and easy, manageable, and results oriented plan for paying off your debts. The debts to pay off include credit cards, car loans, student loans, pay day loans, and personal loans. It essentially includes any debt that you have aside from home mortgage.

The first part of the debt snowball plan is to setup a spreadsheet that lists all of your debts in order from the smallest to the largest. After creating this list you need to put as much of your monthly income as possible toward paying off your debts. After determining how much you can put toward your debts you then need to determine how much your payment should be on each account. In the debt snowball plan you will pay only the minimum payment on each debt you have, except for the one with the lowest balance (at the top of your list).

When you do this it will allow you to pay off the smallest debt very quickly and then move on to the second smallest debt. When you move to the second smallest debt you then allocate everything to that debt that was originally going to the now paid off debt. After you have paid off the this debt you will then move on to the third smallest debt that you have.

In using the debt snowball plan the idea is to continue with it until you have paid off all accounts that you owe money on, except for you house. The ideology behind the debt snowball plan is to gain steam and see real results by paying off the smaller debts first. This allows you to see real results and continue to stay motivated.

Below I have included an example of the debt snowball method

Ignoring interest rates, let's say that someone has the following debt and minimum payments:

Car Payment - $2500 balance - $250 minimum monthly payment

Card A - $250 balance - $25 minimum monthly payment

Loan - $5000 balance - $150 minimum monthly payment

Card B - $500 balance - $29 minimum monthly payment

Your minimum payments for all debt would be $454 per month. You would order your debts in the following order:

Card A - $250 balance - $25 minimum monthly payment

Card B - $500 balance - $29 minimum monthly payment

Loan - $5000 balance - $150 minimum monthly payment

Car Payment - $2500 balance - $250 minimum monthly payment

For this example we will assume that this person has $100 extra to put toward payments. This person would put that $100 toward Card A so that the payment for it would be $125 per month. The other 3 debts would then receive the minimum payments.

After Card A is paid off this person then would put the extra $100 toward Card B PLUS the $25 they were also putting toward Card A. The payment to Card B would now be $151. This allows you to pay off Card B very quickly.

Once Credit Card B is paid off, you would then send in the following to your car loan: $250 normal minimum + $25 that you normally sent in to Credit Card A + $29 that you normally sent in to Credit Card B + $100 extra. Your payment to Car Payment would now be $404.

In using the debt snowball method you simply follow the plan shown above until all of your debts are paid off.

The debt snowball plan is one of the best plans available for paying off the debts that you owe. It helps people to stay motivated through seeing real results and gaining momentum

Mark Loy is a self-made Personal Financial Advising expert who specializes in giving out free Personal Financial Advice over the internet. You can visit his Personal Finance Budgeting blog to learn more about the Debt Snowball Method.

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3 Ways to Reduce Credit Card Debt

By David G. Pasternak

Most people carry balances on their credit cards. Those lenders know this and rely on it, that is how they make the bulk of their money. However, carrying a balance can wind up costing you a lot more money in the long run. Below are a few tips to help you to reduce credit card debt.

The first thing you should do is to make sure that you pay your bill each month. Many of these types of lenders have clauses in their contracts with you that state they can raise your APR (annual percentage rate) dramatically if you miss a payment. That means the interest rate they charge you each month will be dramatically higher than what you are paying now, so your bills will be even higher. If you are having trouble paying your bills, contact the lender immediately. Often they will allow you to work out a payment schedule which will not impact your APR.

Next, try to reduce your outstanding balances. When you carry a balance on your card you wind up paying a lot more than just a little bit of interest on the item you are purchasing. Each month you carry a balance, you are paying interest on the interest charges you accrued previously. That is compound interest, and it really adds up over time. Is that thirty dollar item really worth a few hundred dollars? It can actually wind up costing you that much if you only pay the minimum each month.

Another thing to consider is switching your balance to a credit card that offers a lower APR. Before switching though, contact your bank and negotiate with them. They probably want to keep your business, and may be willing to match the offer you have from another bank for a lower APR. If not, consider switching. Just make sure to read the fine print. Often the banks offer an introductory APR for balance transfers, but that rate goes up dramatically after 6 or 12 months. If the later rate is higher, it might not make sense to make the change. Make sure to read the paperwork!

Finally, the hardest step... do you really need to buy that? Look at ways to reduce your spending for a while until you make inroads on your outstanding balances. The best way to reduce your credit card debt is to stop spending. Obviously there are things you absolutely need to buy: food, gas. But you can probably get away without that new pair of shoes, at least for the next month or two. If you delay your discretionary purchases for awhile, you can apply some of that money to your outstanding bills. Sure it is more fun to buy something than to save money, but you probably do not "need" that 50" LCD plasma HDTV right now. Your regular television probably works just fine. (And do not forget, HD reception costs more from your cable or satellite provider than "regular" television.)

Ultimately, you will rest much easier if you reduce your credit card debt. It is worth looking at these strategies and trying to implement them.

Click here for more information on how to Reduce Credit Card Debt

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How to Reduce Credit Card Debt - 3 Simple Ideas to Get You Started

By Suzette Jamieson

Do you feel like you are drowning in debt? While this may be of little comfort to you, you are hardly alone. But what can you do to reduce credit card debt?

Trying to get out of debt can be a lot like trying to lose weight. When someone needs to lose weight, there are really only 2 factors that come into play. You need to cut your calorie consumption AND you need to burn more calories through exercise ... with the ultimate goal being that you burn more calories than your body needs to function. Doing either one of those will help but will only get you so far. You need to do both in order to really be successful.

And it is exactly the same when you are trying to get out of debt. There are two parts to the equation - spend less than your income and use the excess funds to pay down your debt. Find ways to cut your expenses and then apply those savings to reduce your credit card debt. It sounds simple ... and it IS simple. But that doesn't mean it is easy.

Many times it is just simply a matter of making some small changes to the way you currently do things. Small changes can often work together to have big results. And by breaking things down into manageable chunks, the tasks immediately seem more doable.

Let's say for example that you know you need to find an additional $300 a month. That sounds like a lot, initially, but by breaking it down it becomes a goal you can meet. $300 a month translates into $10 a day. What can you do to spend just $10 a day LESS than you currently spend?

Even $10 a day may seem a little daunting when thought of as a whole, so let's break that down even further. What less expensive items could you adjust in your daily routine?

• Do you stop for coffee on your way into work? Try bringing it from home instead and see how much you will have saved. And if you get a donut or muffin to go with your coffee, those can also be brought from home for even greater savings.
• Do you grab a pick-me-up soda or a snack from the vending machine every afternoon? Again, by buying it yourself at WalMart, Costco or even the grocery store, you can easily spend half as much as what it costs from the vending machine.
• When they ask you at the fast food restaurant if you would like to super-size your lunch, just say no. Your waistline, heart and arteries will thank you for that! And if your big meal is in the evenings anyway, why not try the Dollar Menu that so many places have now? This is usually enough for most people, and many adults even order the kid's meal because it is cheaper than the adult version and is really all they need.

So be honest ... if you made those 3 changes (or similar ones), would you feel deprived? Would you feel like you were being short-changed in any way? Of course not. But think of the money you could save! $300 a month just by making 3 small changes to your workday routine. But don't stop there! See where else you can make small changes that will add up to big savings.

And while this method is simple in nature and relatively easy to implement, are these 3 tips enough for YOU to be successful in getting out of debt? Maybe you feel you need more help in being able to reduce credit card debt [http://dollaradaysystem.com] that is weighing you down. Our Dollar A Day system might be exactly what you need. Check it out at [http://dollaradaysystem.com] and be sure to sign up for the free mini-course to help you jumpstart your journey to debt freedom.

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How to Reduce Credit Card Debt, and Be Finally Debt Free!

By Adi Hartono

Ever since the economy went down many people have lost their jobs. Credit card companies have realized that a huge number of people are not able to pay off their full debt, so in hope of getting at least a part of the money owned they have been negotiating deals and cutting interest rates like never before. So this would be a good time to reduce credit card debt.

The first and most important step is STOP using your plastic money. If you already owe money and keep spending money on stuff that you can't afford you bury yourself in debt. If you can't afford something, don't use your credit card, just don't buy it.

Do whatever you can to keep yourself from using your cards. Freeze them, shred them or anything that will keep you from spending more money. An unpaid debt can have devastating results in your future. It can keep you from getting a car loan, school loan, house mortgage or even a simple department store credit card.

One mistake that most people make is they keep spending more and more money hoping that their debt will magically be forgotten or forgiven. Don't keep spending money on stuff you can't afford if you don't want to ruin your credit. It is important that you keep a clean record, and one way you can do so is when you reduce credit card debt.

Write down all of your credit cards, how much you owe to each one and the minimum payment for each month. Staying on track with your payments will help you reduce credit card debt faster.

The way credit card companies work they reduce your monthly minimum payment as your balance goes down so that it will take you more time to reduce credit card debt. Always pay more than the minimum payment.

If you cannot afford to make the minimum payments and you're trying to negotiate a deal with the company then stop making payments. If you creditors see that you are still making payments while trying to negotiate a deal, they'd obviously have little interest in reducing your debt.

After 60-90 days of not paying any money to your cards, start the negotiation for a deal. Tell them that you're going through financial problems and if they want any money at all from the debt you owe, they will have to settle for a deal.

Start low. Your first offer to reduce credit card debt will probably be refused, that's why you should start negotiation with a lower number than what you can truly afford.

It is important that if you come to a deal with your creditor to get everything in writing. You should always keep documentation for proof in case something goes wrong in the future.

Don't forget that most debt collectors are trained to be mean and intimidating, but don't be nervous when talking to them. Always stay calm and cool. Have a plan of what you're going to do and what you're going to say. Speak loud and clear and the chances of them agreeing to a debt negotiation with you will rise dramatically.

Another important factor is to keep track of your progress visually. This may help a lot of people stay on track and get rid of that debt for good. Try to write down all the payments you made and put it somewhere where you will see it many times during a regular day, like on your fridge.

Always remember to stay calm and focused. Create a list of your personal debts and what you can and can't afford. Don't leave everything for the last minute, act now. Use these tips and you might be surprised how easy it will be to reduce credit card debt.

Find more ways to solve your personal debt problems in http://www.SolvingDebts.com.

Eliminating your debts may not be as difficult as you may think.

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Reduce Credit Card Debt - The Best Tips to Reduce Credit Card Debt Right Now

By Thomas Valsayn

The majority of people living in the United States seemingly have a problem when it comes to using their credit cards. A lot of people have become very dependent on these plastic cards for their purchases. What's even worse is that some people never think about how they are using them and just swipes away. This is why now that the financial crisis has hit, a lot of Americans are having trouble with their credit card statements. These people are the ones who just kept on using their cards without thinking about it. Now, they are faced with the problem on how to reduce credit card debt.

The first and most obvious thing to do to reducing credit card debt is to of course, stop spending. You need to develop discipline in yourself and try to avoid impulsive shopping and purchases that are just not needed. You have to be frugal with your spending from now on. A few tips on doing this is to eat at home and cook your own meals instead of going out. You can also reduce grocery bills by making a list of what you need and sticking to that list only. There are a lot of things you can change to make huge savings. And remember, every little bit counts.

You can also call your creditor to try and negotiate for better payment options or to lower your interest rates. Successfully negotiating this will drastically reduce credit card debt. Your leverage is the same thing that has collapsed your personal finances, the economic downturn. Most banks are willing to negotiate better deals for you because they would rather lower your interest rates rather than get nothing at all. So try calling them up and negotiate. If you have no idea on how to do this, you can try and hire a professional to talk for you.

You can also reduce debt by paying more than just the minimum amount required by your creditor. If you simply pay the minimum, more often than not, you only cover the interest rate which means you are just throwing your cash away since your actual balance is not going down. Try to flow more cash into paying your creditor and you will see good results.

The core of any plan to reduce credit card debt you have accumulated is to budget your money properly. This is another reason why you are deep in debt, you did not budget your money and you spent unwisely. Now is the perfect time to change all of that. Budget your income and allocate on the needs such as rentals, utilities and food, then budget the rest on payments and savings. Although you are trying to reduce your debts at all costs, it is always good to still have a bit of money in your savings account for emergency purposes.

If all else fails and you can't seem to get rid of your credit card debt on your own, you can opt to hire professionals or the services of a third party to help you with this. Although this means money going out again, it can be a worthwhile investment if it means getting rid of your debt.

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Reducing Credit Card Debt - Tips on How to Reduce Credit Card Debt

By Mary Dawn

For those who have massive credit card debts under their belts and would like to see that amount dwindle away to nothing, there are quite a number of ways to reduce credit card debts. Well there are two most important things of course such as you having both the commitment and willingness to see that the problem gets solved. This also helps reducing credit card debt so much easier in the process.

A lot of people have been buried by mountains of debts and are looking for quick ways to reduce it and be done with financial problems forever. Especially since the amount you pay every month doesn't seem to make any difference whatsoever in the total amount that is due. No thanks to surcharges and late fees.

Now the first thing to know in order to reduce the amount of debt on your credit lines quickly is to pay more than the minimum amount that is required. Surprisingly, there are quite a few people who are aware of this. However there are options that are always readily available, yes, even for those who have been seeing doomsday since that last credit card bill was delivered. Now it is important to stay relaxed and calm and do not under any circumstances panic especially when you think about all the other payments that you have to make. There are three common tips to reducing credit card debt and doing it quickly:

* Pay larger amounts than your minimum monthly payment required. Yes I have mentioned this earlier. Avoid paying just the minimum monthly amount lest you be incurred with surcharges and late payment fees which add up to the amount of money that you originally owe. If you really need to use credit lines, try searching for a card that has lower interest rates.
* Try for home refinancing. This works to reduce your credit card debts in short lengths of time. You can go on and use the equity from refinancing your home to pay off the credit card debt.
* Make sure though, that before refinancing your home, everything to be done and the processes that you have to take is understood and that you will not under any circumstances; use your credit card to pay off the financing on your house. Seriously, that would be going around in circles, debt-wise.

As is true with any other techniques or ideas to reducing credit card debt, you will encounter negative and positive feedback and factors when it comes down to paying more and that includes things like home refinancing. And if all else fails, you can always go out and apply for a personal loan to get all your debts paid instead of getting another credit card that offers a lower rate; And then using that new credit line to pay off the previous debt on the first credit card. What was that I said about going in circles?

Nevertheless, reducing credit debt takes more research and thinking than you would care to admit. You have to take extra care in considering every situation so as to make the best choice. If you would want, a credit counselor would be happy to help you out and offer sound advice.

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7 Easy Tips to Reduce Credit Card Debts

By Rob Timothy

The following are 7 easy tips on how you can reduce and at the same trying to get out of credit card debts easily. A strong commitment from yourself is really required to make this goal come true.

Stop charging. Obviously, this is one of the first things you want to do. Unfortunately, most people fail to do with any conviction. It should seem obvious to anyone that the first step out of any hole is to stop digging. It is only after you stop making the problem worse that you can begin to devise a plan to get out of credit card debt. You may need to cut up your cards or at least take them out of your wallet and leave them at home. The point is to totally stop making new charges.

Transfer your card balances over to another one that has a lower interest. The lower the interest rate average is on your remaining debt, the larger the impact each of the payments you make will have on that remaining balance. You may also want to consider a credit card debt consolidation loan that has a lower interest rate.

Pay off debts from the smallest to the largest. You should make the minimum payment possible on all of the larger balances, except the smallest one, and then pay as much as you can on the smallest debt. This way will reduce your total debts slowly but sure.

Pay half of your minimum monthly payments twice a month. Interest calculations are based on the daily average balance of your account during the entire month. When you make payments every two weeks, you are actually reducing the average balance and as such you are also reducing the finance charges that are assessed. This way is more cost effective to reduce your credit card debts than waiting until the end of the month to make a single payment.

Make micro payments any time you receive extra money. Send the majority of any extra money you may receive, such as proceeds from part time or overtime work or garage sales directly to your credit card as soon as you receive them. Do not use that money for any other expenses. Although it may not seem like much but it does add up and soon you will get out of credit card debts.

Find part time works to earn extra income. Perhaps, this is the only option you may have to generate extra cash flow. This is, of course a last resort you can try.

Close your newest accounts. As you pay your credit card balances off, close out these cards if you own more than a card. When you close these newer cards you will effectively be increasing the average age of your credit history by at least five or six months of expenses. This way seems to be the best way to get out of credit card debts soon.

By following these tips above, you should be able to make progress towards freedom from your debt. If you are like most people and went a little overboard with your cards at an early age, you may also want to consider a low interest consolidation loan to pay off your debt at a lower rate. It really helps to reduce credit card debts and if you go this route you should cancel all but one card, and considering lowering the credit line on that one down to a manageable level. Should you fail to do this, you may wind up with more debts and it is very hard to get out of credit card debts.

I do really hope this short article would help to give a clear ideas on how to reduce credit card debts by using some simple and easy-to-implement solutions and at the end you can get out of your credit card debts.

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