Finding The Perfect Debt Elimination Plan For YOU

You have committed to paying down your debt. No more random online subscriptions, no more nights out at the bar all covered by your credit card, no more video games, no more Ed Hardy shirts, and no more BS. You are in full debt elimination mode- well at least you want to be. You want to cut back on expenses and earn more money. While cutting back on expenses you’ll find sites like savings.com that offer discounts on products that you already purchase. The benefit here is that you can save lots of money with a little effort.

Now you have to decide what your debt elimination plan will be. If you do not have a debt eliminator strategy then do not worry because that will all change after reading this post.

The Debt Snowball debt elimination plan

The first debt elimination plan I will cover is the Dave Ramsey Debt Snowball. We all are at least somewhat aware of the Dave Ramsey tool for debt elimination from his Total Money Makeover book. If you are not informed on how to apply this debt elimination plan, the basic tenet of it is:

Pay off the debt with lowest balance, regardless of interest rates, for a much needed psychological victory.

I will not conclude this post with such a general answer, so here is the Dave Ramsey Debt Snowball described in detail.

1. Rank your debt from lowest to highest balance.

2. Pay the minimum payment on all of your debt.

3. Put every additional dollar you earn or save towards the debt with lowest balance (regardless of the interest rate).

4. Repeat this process until you finally begin to tackle your highest balance.

The motivation that comes along with paying down one of your debts can be very remarkable. Some respectable personal finance bloggers have argued that Dave Ramsey is brilliant because of this. Then on the other hand, many personal finance analysts are skeptical of this paying down debt option. They argue it makes no sense in terms of dollars and that Dave Ramsey is simply bad at math.

I personally feel that this is a great option if you are an ultimate beginner to debt reduction and need some sort of psychological boost to get you through the most difficult time (first few months of debt elimination). Twenty somethings are not machines. We don’t always do the most logical thing nor are we always driven by math alone. Yes we know credit card debt sucks, but that doesn’t stop us from using them.

Reader beware, you will pay more in the long run using the Dave Ramsey Debt Snowball, but some of the mental benefits can not be quantified.

The simple math debt elimination plan

However, if you feel you are one of the more advanced readers of Studenomics or that you can put up with the rough start of your debt elimination journey, then you can always try this method:

1. Rank your debt from highest to lowest interest rate.

2. Pay the minimum payment on all of your debt.

3. Put every extra penny towards your high interest debt.

4. Repeat this process and move on to the next high interest debt.

This is technically the logical approach but in practice it is not necessarily the best method. Credit card debt elimination is never easy and your progress will feel stagnant when you don’t see any results after a few months.

If you have the discipline and are all about numbers then the paying down your highest interest rate first debt elimination plan will work for you.

If you are like 95% of us and need some sort of motivational boost when on the long journey to total debt elimination, the Dave Ramsey debt snowball strategy is for you.

Which debt elimination plan will you follow?