There are many ways to get out of debt. Some are helpful; some are actually harmful. One strategy that often fails is debt consolidation. In our opinion there is always a better way.

Debt consolidation looks so appealing, but there are some dangers. You will possibly end up paying a much higher rate for a much longer term, so it costs you dearly. Also, debt consolidation can backfire if you look at your new, low monthly payment and decide that you can afford to make some other purchases on credit. Then you repeat the cycle that got you into financial bondage in the first place.

Remember that there are companies out there who seem to be offering you help, but in reality they are just increasing your financial bondage and their profits.

A far better system is one that helps you develop discipline and contentment while giving you the satisfaction of seeing your debt load steadily decrease. That is the beauty of the Snowball. I must tell you that we do not know who first came up with this plan or the name for it, but whoever it is we thank them! Many people have been helped by it.

Here’s how the Snowball works:

• Put all your credit cards away. Do not incur any more debt!
• List all your creditors. Do not include your mortgage or house rental payment.
• For each creditor, divide the amount owed by the minimum monthly payment. Here’s an example:

$1000 (amount of debt) divided by $50 (minimum payment) = 20

$2000 divided by $40 = 50

$500 divided by $50 = 10

Do that for each debt.

• Now choose the debt with the lowest number. In the example above it would be the $500 debt since it will be paid in ten months.
• Next, determine what amount from your regular income you can add to the $50 each month. Let’s say you can double it each month. Now you are paying $100 on a $500 note so you will pay it off in five months instead of ten! Continue paying the original minimum payment on all other cards.
• That’s good, but now the real fun begins. Since you are already accustomed to paying $100 each month on that debt, and since it is now paid off, add that $100 to the next highest monthly number. (In our example you would increase the payment on the $1000 debt from $50 to $150.) By doing thatyou will pay it off in about seven months instead of twenty months!
• Repeat the process with each debt, being careful to not incur any additional debt and you will be debt free in a much shorter time.
• The last step, once you retire all debt, is to place the full amount of the payments into savings each month. Follow this plan and you will learn self-control, financial discipline, and faithfulness.

Does the snowball work in other cultures outside America? We wondered about that. Then we met a young man to whom we had given those principles about three years earlier. At the time he had just finished university, but still had many debts. He followed those principles and is, today, debt free and smiling!

The two keys to making this plan work are discipline and contentment. Both of those qualities will make you a stronger, much more stable person, and the debt monster will have to find another victim.