A family with about $340,000 combined income faces roughly $200,000 in consumer debt, including credit cards, personal loans, and a HELOC. The decision involves whether to add a $20,000 Parent PLUS loan to cover college costs. The debt snowball method recommends listing debts from smallest to largest, paying minimums on all debts, and directing extra money to the smallest balance until it is eliminated. With monthly take-home around $16,000 and a mortgage around $4,400, remaining cash flow can be used to attack the debt. Even allocating $5,000 per month can reduce principal in about three and a half years, while $7,000 per month can shorten the timeline to about two and a half years before interest effects.
"Help me understand how a family making $340,000 is $200,000 in consumer debt. What happened?"
"We need to clean up the $200,000 of debt using the debt snowball. So attacking the smallest one first."
"My hope is, and my sense is that you guys are gonna look up"
"If a family earning that much routes even $5,000 a month at a $200,000 debt load, the principal alone is gone in roughly three and a half years. Push it to $7,000 a month by cutting lifestyle hard, and you are looking at closer to two and a half years, even before factoring in interest savings as smaller balances disappear."
Read at 24/7 Wall St.
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