Debt Reduction - Eliminate Debt The Snowball Way - Steps 4-6

In my previous post i reviewed the first 3 steps of the very popular debt reduction technique known as the debt snowball.
The first three steps in using the debt snowball technique to eliminate all your debts were:

Debt Snowball Step #1: List All Your Debts Starting with the Smallest Balance

Debt Snowball Step #2: Only Pay the Minimum Amount on Each Debt

Debt Snowball Step #3: Make Extra Payments on the Smallest Debt
The next steps are:

Debt Snowball Step #4: Once the Smallest Loan is paid in Full, Celebrate!

I don’t think this step needs much explanation! Needless to say don’t use any additional lines of credit to pay for your celebration!

Debt Snowball Step #5 Tackle the Next Smallest Loan

Now that the smallest loan is paid in full, you add the old minimum payment (plus any extra amount you were paying) from the first loan to the minimum payment on the second smallest one, and apply this new sum to repaying the second smallest.

Debt Snowball Step #6: Repeat Until All Debt is Paid

Repeat the process with each subsequent debt. In theory, by the time the final ones are reached, the extra amount paid toward the larger debts will have grow quickly, similar to a snowball rolling downhill gathering more snow (thus the name).

Note: A first home mortgage is generally not included in the debt snowball method, but is instead paid off as part of a larger financial plan. Many financial plans recommend pay off home mortgages in a later step, along with any other debt which is equal to or greater than half of one's annual take-home pay.

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