Apr 6, 2009

The keys to paying off debt: persistence, consistency & growing your debt snowball

Kelly at The ¢entsible Life explained how she's paying off her debt, and asked her readers how they've paid or are paying their debts off. It occurred to me that the single most important thing we've done to get so close to being debt-free is being persistent and consistent. We've made every payment on time. We've always paid extra, even if it wasn't much, especially at the beginning.

And the other thing we've done that's been key is grow our debt snowball. The "debt snowball" is simply the payment you make each month toward your debt - it's a "snowball" because when you pay off one debt, you apply the payment you'd been making toward the next debt, and you keep doing it until all of your debts are paid off. (No Credit Needed has a more detailed explanation about debt snowballs.)

We've consistently added to our debt snowball over the years. Salary increases in particular have helped grow our debt snowball. Also, any long term decreases in our expenses - such as a reduction in our insurance premiums - have been applied to our debt snowball.

I'm a believer in "snowflaking" too - a term coined by PaidTwice for random savings that can be applied to pay off debt. It's been my experience, though, that snowflaking is most effective when you can't grow your debt snowball. Growing the debt snowball is more effective than snowflaking because it's a regular thing - there's that much more money going toward the debt each month. But of course, adding snowflaking to your growing debt snowball will pay off your loans fastest of all.


Kristy @ Master Your Card said...

I've never had much success with snowflaking so I didn't bother when I was paying off my debt. The only consumer debt I have left is my car and my student loans. The car will be paid off in a matter of months and then I'm going to start throwing that money at the student loans. My goal is to leave school with very little debt because I've been paying along the way. I wish I didn't have any, but no sense worrying about that now. Getting it paid off will be the goal, and the debt snowball is a wonderful technique! Persistence and consistency are excellent, but I also think commitment needs to be up there. I can be persistent and consistent at a lot of things and do just fine, but commitment is the difference between exceeding expectations and mediocrity. Great points!

Kelly said...

Thanks for sharing your thoughts, Cathy!

I love reading what works for you. :)

tom said...

Persistent and consistence are very important but that alone will not stick the deal together.

What I mean is you need to find out what you spend money on, why you spend it, why you need it and what are the flaws/insecurities with it.

Also, there needs to be a strong enough reason for you not wanting to be in debt and wanting to change that.