Use the same behavior that got you into debt to grow your savings.
Pay off what you owe and then contribute that same amount to your savings — and watch your wealth grow
Debt relief may seem insurmountable to many. Get Rich Slowly founder J.D. Roth says it's simpler if you pay more than your minimal monthly balance.
Roth tells NBC News BETTER, "The idea is to throw as much money as possible at your debts."
Roth uses Dave Ramsey's "debt snowball" strategy.
First, "snowball" debt.
Say your monthly debts are $1,000. After paying off one debt, your monthly payment drops to $800. You keep paying $1,000 until your debts are paid off.
Roth suggests using raises, bonuses, and windfalls to pay down debts.
“Throw that money at your debt repayment, and by doing so — by making more than minimum payments — the debt gets repaid much faster,” adds Roth.
The blogger utilized the strategy to pay off $35,000 in debt in his mid-30s.
Roth says it took him 39 months to pay down $35,000.
Build a "wealth snowball" once you're debt-free.
According to Roth, many people who pay off their loans struggle to stay debt-free.
“Once people get out of debt, they're lost,” he says. They're unsure what to do with their money. So they start spending again, and it's like losing weight... they get into the same spending difficulties they had before.
Build a "wealth snowball" to prevent this problem. Instead of spending $1,000 a month on loans, he suggests saving it.
You can save the money for retirement, a house, or your children's college, he explains. Personal needs matter.
Start a wealth snowball by putting money away each month in a retirement account, if possible. If not retirement funds, then investment accounts where profits can compound, creating a wealth avalanche akin to a debt snowball.
Spend less
Roth says you may not comprehend how to start a wealth snowball.
Subscriptions and recurring monthly payments are huge money-savers, he argues.
Roth argues it's important to get consumers to subscribe to services. Netflix and Microsoft Office are subscription-based.
These modest subscriptions add up. Getting rid of one can boost your wealth avalanche.
“Keep a close eye on recurring monthly expenses because they act as an anchor dragging you down,” Roth adds.
BEING Rich isn't necessary
Your wealth snowball contributions rely on your budget. Roth maintains that a low income doesn't preclude saving.
Roth argues it's hard to save $100, $250, or $500 a month if your income is minimal. "If so, save $10, $25, or $50 a month. Everything helps.”
Roth advises contributing as much as possible to a retirement account if possible. For some, that means putting away 5% of their salary. Others contribute 50%.
More aggressive people can retire sooner, he argues.
Roth says saving is more essential.
"Whatever you want to achieve will come from that gap," says Roth.
How to create a "Wealth snowball"
Step 1: Say you paid off a credit vehicle charge, lowering your total minimum obligations to $800. Continue paying $1,000 until your bills are paid off. Include raises, bonuses, and windfalls in debt repayment.
Step 2: Build a "wealth snowball": Now that you've paid off your debt, invest $1,000 a month to earn interest. Your wealth snowball grows as you contribute more.
Step 3: Reduce needless recurrent spending to boost your money snowball.
Don't be poor: You can donate $200 or $10 a month. Everything counts.
Cherish every day and your life will be magical
(Source article: How to get out of debt and build a 'wealth snowball')
