Sunday, December 26, 2010

My Ally in Paying Off Debts

After getting my first credit card from BDO, I just noticed that I can't stop myself from using it. Whenever I see the word SALE, I automatically checked the place and come out with a purchase. Comes November where Starbucks releases their planner my credit card debt goes up. It seems that I really can't stop myself from using my card.

After getting my bill from BDO I got so anxious, my debt is more than my monthly income. Never really see this coming. There's even a night that I can't sleep thinking about my credit card debt. That's when I decided to control my credit card usage, but I still owned overwhelming debt.

Got a book by Calayco and it suggest that I should first pay the debt with the one that have a high interest rate. I tried this approach for 3 months but it seems that I'm going nowhere. My debt is still in the same level because some of my low interest bearing debts are compounding.

This keeps on going over. I try to pay the balance by I keep on surging down.

Then I read about the Debt Snowball Method. The Debt Snowball advices to pay off high-interest rate debts first, then you pay off low-balance debts first. Why? Because you’ll get the psychological lift of pinging debts off in rapid succession. And if you’re like me, this makes all the difference. The Debt Snowball approach is:

1. Order all the debts you have from the lowest balance to the highest.

2. Allocate minimum payment for all debts.

3. Allocate more money for the one that have the smallest balance.

4. Once you are able to eliminate the one that have the smallest balance, keep on paying the minimum on all other debts then use the minimum payment that you have on the second lowest balance plus the amount that you used to pay off the lowest balance that you have.

I was amazed that after a few months of doing the snowball method I was able to pay off some off my debts though I still face my debt that have a higher interest as it was the one that have a higher balance. Today I only have one debt that I'm trying to pay off and as long as I have extra cash I automatically allocate it to debt payment.

Hopefully I will be able to declare myself debt free by the first quarter of 2011.

If you are a bit skeptical about the snowball method you can always use the method that Colayco advises. 

Do what you think is best for you.

photo credits:


  1. This is so true. I was able to read this method months ago and it really helped me a lot.


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