As a resident of California, we managed to repay a debt of $ 69 thousand in three years

In 2007, Gwen Garrido of San Diego (California) graduated from UCLA with a bachelor's degree and student debt in 40 000 dollars. By the end of 2014, its total loan debt increased to 68 600 dollars: this amount included a loan to buy a car, credit card debt, and several other small loans. But after three years and three months, Garrido paid off all her debts.

Фото: Depositphotos

How she succeeded, said the publication CNBC.

To pay off her debts, the woman used a strategy popularized by money expert Dave Ramsey—the “snowball method.” According to this strategy, a person should give priority to his smallest debts, regardless of the interest rates accruing on each of the loans. For Garrido, this meant she had to start paying off her debts by paying $50 to the supermarket Target.

The idea of ​​this method is that you will see your debts disappear, and this will motivate you to continue the process, because if you pay a large amount of debt to avoid interest, the amount of debt does not decrease and the person does not feel psychologically .

After paying off her credit card debts, the woman moved on to paying off personal loans and a car loan, and then began paying off her biggest debt, a student loan.

While some experts recommend extinguishing debts using the “avalanche method”, which minimizes the amount of interest on loans that you pay in general, and is mathematically the most effective way to handle debts, Harvard Business Review found that the “snowball method” is actually a more effective strategy, thanks to its psychological impact.

“Focusing on paying off the account with the smallest balance tends to have the strongest impact on people's perception of progress and therefore their motivation to continue paying off their debts,” the study says.

To try this method, make a list of all your debts, from smallest to largest. Make the minimum payment on each of them, with the exception of the smallest debt - try to pay it off as quickly as possible. To do this, allocate the maximum amount of money possible in your case until the first debt is paid off. Then move on to the second smallest debt etc.

According to Ramsey, starting with small debts, you will be able to pay off the first few of them in just a week, and this will rekindle your excitement, which ultimately will lead to faster closure of all debts.

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