There are many ways to pay off debt. And math guys will argue about each one. Let them argue. What I’ve realized is that as long as you pay it off, it don’t matter the route you take. Getting to the destination is the important thing.
When my wife and I came up with the debt ladder, we knew several things about ourselves. We knew we needed cheerleaders. Our cheerleaders were kinda like Sherpas are for climbing a mountain. They’ve been there before and want to see you arrive at the peak. They can help you as you build your road map.
As well, we knew that we needed some momentum. We needed to get our kids excited about climbing the ladder. So by building in incentives, it kept us and our kids fired up to climb each step.
While you can go many routes to pay off debt, I believe in the debt ladder. It is effective. It helped us become debt free and it can help you. So here are 6 Reasons that the Debt Ladder is the most effective way to pay off debt.
1. It has the strengths of the debt snowball.
The debt snowball is a system where you list your debts smallest to largest. Then you pay off the smallest first and roll over your payments into each new debt. It builds momentum like a snowball rolling down a mountain.
By the time you are paying off your biggest debt you’ve gained so much strength because of the previous debts that are now gone.
The Debt Ladder takes the good from the debt snowball that is the momentum. That momentum we call the Carryover. The Carryover is the amount of payments that have accumulated as you’ve climbed the ladder.
2. The Debt Ladder Gives Flexibility and can be shaped how needed.
While the Debt Ladder has the strengths of the Debt Snowball, it also has flexibility to it. You can adjust it for your situation. You can mold it to your circumstance.
If incentives aren’t your cup of tea, no problem. You don’t have to do the incentives.
If cheerleaders make you nervous, or you work better alone, that’s fine.
If the idea of the Carryover is confusing and you don’t want to do it, that’s fine too.
You can make the ladder do whatever it needs you to do as you pay off your debt. It provides enough flexibility.
3. The Debt Ladder gives boundaries and requires discipline
The Debt Ladder gives you the path and the boundaries to keep you on the path.
It’s immensely important to consider how to ensure that with the flexibility that the Debt Ladder offers, it also requires decisiveness and discipline. You have to decide you are doing it and stick with it.
4. The Debt Ladder utilizes technology.
Finances have become easier then ever. You can do it all from your phone. You can automate your debt payments. Automate your investments. Automate your savings.
As well, you can track it live daily. When information comes out about new opportunities, you can hop on it immediately.
The Debt ladder gives you the ability to send money into an online savings account monthly. These savings accounts are great because many have high Annual Percentage Yields. Meaning, your money in your savings is making a little bit of money it’s self.
5. The Debt Ladder realizes the good in positive reinforcement.
Positive Reinforcement is something that brings about more change for more people then ever before. The idea of slugging along is no longer the way people want to be living life. Why not be able to pay off $20,000 of debt and add in another $3,000 for a trip to Cabo, football tickets and whatever else you’re interested in?
Yea! You heard me! Each step of the ladder correlates with an incentive. You decide the incentives based on what you want to do. Have fun with it! Dream big. Will this slow you down? Think about this, if you know you’re pushing towards something that you really want, won’t you consider running a little bit harder?
6. The Debt Ladder ensures you don’t skip out on a period of you or your families lives.
As a family man, I know how quickly life happens with our kids. They grow up incredibly fast. I get emotional thinking about it. Most of the debt payment systems I’ve seen only included suffering and waiting in the system. Beans and Rice, Rice and Beans. But while, it’s important to become disciplined and restrictive, why not include some rewards as you accomplish progress?
You can still have a goal in mind of that family trip while the kids are young to Disney. Or you can backpack Europe. Or even catch that NFL game you’ve wanted to go to. As long as you budget it well and it fits in a good spot as a proper reward.
You don’t have to miss out on the baby stage of your kids just because you’re paying off debt.