Snowball Your Way Out of Debt in Six Simple Steps

We know all too well the heavy load debt can be in our lives. Debt is probably one of the biggest burdens in our consumer society, and one heck of a monster that puts a leash on your best efforts to gain wealth and keep it.  

I’ve mentioned before that it is absolutely necessary to use a financial plan to manage your company. Poorly managed business expenses lead to out of control costs and skyrocketing debt which means profits that are gone before they hit the bank. Too much debt translates into wasted time, investment and hard-earned money; some of which you will never get back.  

“Don’t let business debt suck your revenues dry and hold you back from reaching financial success you’ve worked for. If juggling cash and paying off loans and credit cards are slowing you down, its time to make a change.”

One popular method for erasing debt is the “debt snowball method” described by personal finance wizard Dave Ramsey.  Apply this method to your business debts and you can say goodbye to all the cash eating debts that are hurting your business!  

Wondering what a debt snowball means?  

Here’s the deal:

1. Make a list of all business debts, smallest to largest, and note the minimum payments for each.
   For this example. assume that the company has a total of 5 loans and credit cards to pay down and that each has a minimum payment of $50.
   

2. Make the minimum payment on each business debt monthly. 
   In my example that will be $250 monthly just for minimum payments. Be sure to include that minimum payments in your cash spending plan.
   

3. Decide in advance on a small percentage of your gross profits that you will use specifically toward debt repayment; this should also be part of your cash spending plan.  For our example the company will put an extra $500 each month towards paying down debts. Now it gets fun. 
   

4. Take your “snowball” (the $500 you’ve put aside) and pay that toward your smallest debt, along with the minimum payment.
   Being the smallest, this should be the easiest debt to get rid of. Keep paying that additional $500 each month until you pay off the smallest debt.  Then, pat yourself on the back for destroying that debt.
   

5. Next, take your original snowball of $500 plus the $50 minimum payment you were paying into your smallest loan to create a new bigger snowball of $550.
   Use your new $550 snowball and send it to pay down your next smallest debt.  Keep going until you pay off that next smallest loan. Do a small victory dance!  You know what comes next.
   

6. Your snowball is now $600.
   Use this toward your next smallest business debt. Continue this pattern month after month. You will steadily increase the size of your loan repayment as you lower the number of debt payments you need to make.  Each time you roll your payments into a bigger snowball you’ll actually accelerate the rate at which you are paying down your loans.

When they are all paid off and your credit cards are current, crack open some champagne, take your family out to dinner, or do whatever you love to celebrate.

Once you’ve paid off your business debts all the cash you were using for loan or credit card payments is officially your cash profit.  You can use part of it to invest in business growth or more staff and part of it to give yourself a healthy dividend from your profitable business.

Think about it.

Employing one simple strategy could have you on your way to achieving all the goals you have for your business.  It’s time to start focusing on the change you wish to make in the world, and not on the constant burdens that have you up to your ears in worry. 

To begin to discover where your business needs to make financial shifts, try our FREE Revenue Calculator!

A solid revenue target should be set to cover the 5 cash needs of your business — and that’s exactly what the calculator guides you through. 

Simply answer the questions in the tool below and discover your achievable goals. 

If you don’t get the results you’re looking for the first time, that’s okay! Just continue adjusting your numbers until you find a solution that makes sense for YOU and your business.

Knowledge is powerful, and that’s what we want you to gain with this Revenue Calculator!