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Consumers should ‘snowball’ payments to reduce debt quicker
STILLWATER, Okla. – Although the weather in Oklahoma has started to cool off, most consumers probably are not yet thinking about snowballs.
However, from a financial stand point, consumers should think about snowballs all the time, said Sissy Osteen, Oklahoma State University Cooperative Extension Service resource management specialist.
“The term ‘snowball’ simply means that once one debt is paid off, consumers should redirect that payment and add it to the payment of another existing debt,” Osteen said. “This is especially critical for credit card payments. For many high-interest credit cards, the minimum monthly payment barely covers the monthly finance charges. This is why it can sometimes take consumers years to pay off debt if they make only the minimum payments, even if they don’t add more charges to the card.”
One great resource used by OSU Cooperative Extension county educators is called PowerPay. This free, online financial tool can show consumers how quickly they can get out of debt by snowballing payments. Consumers can find this program at www.powerpay.org.
Some of the features of PowerPay include:
- PowerPay: How soon can I be out of debt? Eliminate debt faster by making power payments.
- Spending Plan: How much am I spending? Compare what you spend to that recommended by financial experts.
- PowerSave: How much am I saving? Project savings using the different PowerSave options.
- Calculators: How can I look at my finances quickly? Calculate house and transportation costs, emergency savings and more.
- Education Center: How can I learn more? View PowerPoint presentations, articles and fact sheets about various financial topics.
“This is a great resource for consumers so they can really see how much quicker they can pay off debts. When you see it in black and white, there can be a great psychological effect of seeing accounts get paid off,” Osteen said. “This may be one way to help ensure consumers stick to their accelerated debt-reduction plan.”
Consumers can learn how much they can save by paying extra on a monthly basis, or even if they simply make a one-time payment with extra funds.
As an added bonus, once debt is eliminated, saving and investing become possible. PowerSave enables users to identify the steps to save or invest money.
Here are some features of the PowerSave aspect of the Web site:
- Fixed Savings Payment: If I invest a regular amount at a fixed interest rate and period, how much will I earn?
- Invest a Lump Sum: How much will I earn if I invest a lump sum now for a given time and interest rate?
- Reach a Savings Goal: How much do I have to invest regularly at a fixed rate to reach a certain savings goal?
- Withdraw for a Specified Time: How much can I regularly withdraw from a lump sum to last a specific amount of time?
- Withdraw a Specified Amount: How much would a lump sum of money drawn down at regular intervals and amounts last?
“Paying off a loan and then snowballing the payment to another loan is a win-win situation for any household,” Osteen said. “You’ll not only get out of debt faster, but you’ll be able to achieve other savings goals as well. Many of us are visual, and the PowerPay program allows consumers to see the actual effects of making a change.”
If you need help using the PowerPay or PowerSave programs, call your local OSU Cooperative Extension Service office, usually located under government in the local telephone directory.
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Oklahoma State
University, U.S. Department of Agriculture, State and
Local Governments Cooperating: The Oklahoma Cooperative Extension Service
offers its programs to all eligible persons regardless of race, color, national
origin, religion, gender, age, disability, or status as a veteran, and is an
equal opportunity employer.
Trisha Gedon
Communications
Specialist
Agricultural
Communications Services
136 Agriculture
North
Oklahoma State University
Stillwater, OK 74078
405-744-3625
(phone)
405-744-5739
(fax)
trisha.gedon@okstate.edu
