The biggest mistake that most people make with their money is not thinking critically about it. Your money isn’t something to casually think about, spending it on whatever and only worrying when it gets low. Thinking about your finances critically can help you save some serious money.
What do we mean by “thinking critically”? Well, we mean facing your finances with a straight face. If you have debts (don’t we all?) and you’re looking to save money, budgeting and prioritizing are your best bets for making your money go farther. Here’s what you need to know to save some serious money.
You probably have some debt. That’s the reality for most people. Your home’s mortgage, your car payment, other incidental debts you may have incurred. They all add up. The best way to handle these debts and save your money is to “snowball strategy” them.
The snowball strategy was named such by financial advisors and is deceptively simple. The idea is that you start by funneling as much extra money as you can to your smallest debt. Maybe this is your car payment, or maybe it’s a personal loan. Whatever it might be, start pummeling it with all the extra cash you can muster.
By paying off your smallest loans quickly, you get their interest out of the way. The longer you let a debt percolate, the more it accrues interest. That’s money that you’re giving away to the lender for nothing. Don’t lose money just because you borrowed some cash! Pay back your debts as quickly as you can to avoid paying way more than you borrowed.
Once you’ve focused down a small debt, move to the next largest debt you have. Take all that extra money you were able to save by finishing that first debt off. Now, you’re snowballing. Once this second debt has been dealt with, you’ve got even more money to spare. Send all that at your next debt. You see where this is going?
Before you know it, you’ll have much more money freed up to handle your bills. Snowballing lets you clear your debts out, stop paying so much interest, and start making critical moves with your finances. Just think about how much money you’d have if you didn’t have to pay your car payment, your mortgage, or your student loans.
Let that thought motivate you to clear out your debts by snowballing them!