by Mopes

Created on: January 27, 2009   Last Updated: January 28, 2009

It is becoming more common for the American citizen to have ever-increasing amounts of debt. With our banking system based primarily on the lending of money, it's becoming impossible for the average person to avoid taking out a loan at one point in their life. Without a loan, most cannot afford college, a house, or even a car.

This would normally be okay if it were not for the prolific credit card industry we entertain here in the United States. The average person holds nearly $9000 in credit card debt, on top of any "important loans." With the average interest rate being just over 18% it does not bode well for the consumers of our nation. Over half of us pay off nothing but the minimum payment on a credit card. On top of all this, the majority of these cards only require the interest plus 1% of the principal be paid monthly. This means credit card balances tend to last years, if not decades. This isn't even mentioning the fact that most of us carry multiple cards.

If this sounds like you, there is one simple method that you should learn and execute in your day to day life. It's a method that doesn't require a fancy budget, or strict self-control. It's very simple, in fact. It's been widely popularized as "The Debt Snowball" but I prefer the moniker "common sense."

There are six simple steps to get you started:

1. Get all your paperwork together. You want every single bit of paperwork relating to one of your debts in one place.

2. Organize these debts by interest rate, highest to lowest.

3. On all debts but the highest interest rate, you pay the minimum payment.

4. On the remaining debt you pay the minimum payment plus an additional amount of your choosing. This amount can be as low as ten or twenty dollars, but quite obviously, the more you can afford the better. My personal guideline would be adding 25%.

Then you rinse, and repeat until that highest interest rate debt is paid off. All you're really doing is covering the minimums plus a tiny fee.

And then there are two more simple steps to complete the entire maneuvre.

5. When a debt is completed, you take the next highest rated debt, continue the minimum payment, but also apply the exact same amount you were paying to the newly paid off debt.

6. Rinse, and repeat.

If you follow these six simple rules you will be debt free much sooner than you realize, and you won't have any reason to stress every single day about the money you owe.

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