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DebtREDUCTION| Smallest Account

The Assumptions

1| You have debt
2| You want to reduce/eliminate your debt
3| You have a Zero Balance Budget
4| You have an Accountability Partner
5| You understand Snowballing Debt Payments

The Positives:

1| Easy to set up the strategy
2| Mentally, it is a very rewarding way to pay off your debt (loans), since you can pay off the smaller balances quicker. When you are able to eliminate a balance and reduce the number of outstanding loans, it gives you a sense of accomplishment.

The Negatives:

1| If your larger loans have higher interest rates, you may pay more interest over time and extend the total time to pay off all loans, versus focusing on the loans with the higher rates.

The Process:

1|Organize your debt (loans), in order of the one with the smallest balance to the one with the largest balance.
2| Focus your excess debt allowance and/or unused cash flow to the first loan on your list.
3| When you pay off a loan, snowball that payment onto the next loan on your list.
4| Repeat steps 2 & 3 until you are out of debt.

Brandon Haines

MBA | AAMS® | AWMA® | CFP®

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