Summary – Yesterday it’s big to small.. Today it’s small to big

Today I’m going to prove to you that there are always two ways or more to see at things and both of them can be correct. Yesterday, I highlighted that we should always finish the biggest task to motivate us. Apparently there is another concept I just found while reading in the internet that describe it the other way around.

That concept simply urge us to finish the smallest to motivate us. See… Exactly the opposite but still true. Let me explain this concept.

It is called snowballing and it is a widely used methods to clear debt. An example will illustrate better.One man had 4 debt to settle, house loan, car loan, credit card and study loan. According to Snowballing Concept, the man need to figure out what is the minimum amount he can pay for each loan. He will then have to figure out which loan is the lowest amount.

In this specific case, his credit card is the lowest at about RM3000, so what he should do is to pay all other loans at the minimum amount. And the remaining money is used to pay off the credit card. For example, after deducting all the minimum payment to other loans, he still have RM500 cash. That money must be used entirely to pay off his credit card. In about 6 months he will finish paying the credit card.

Then he moved to the next loan with the lowest amount, let say study loan. Previously he pay a minimum of RM200 per month, now he must snowball the payment and use the extra money from not paying credit card (RM500) and pay the study loan at RM700 / month (Snowball). This goes on until he finished all his debt.

I actually think that this make sense. To finish all debt the lowest ones first. Now compare this entry and the entry yesterday. Both of them emphasis exactly the opposite things and yet both of them is correct.

What do you think? Is this snowballing strategy practical?

————–Personal Note————-

I still have long way to go to finish my loans. And when those loans are settled, I’m very sure I will start with my house loan. So it’s really a never ending story :)One thing for sure, when we owe someone, we have to pay them. Even one cents. I’m very particular with this, because it will be very disappointing when somebody owe me money and he didn’t even bother to pay me back. He even look at me as if I’m the one who owe him money. And that is why, I stop lending people money except for family of course. Come be my family huhu