My last post was all about how I got into debt and then how I started the process to get out of it by beginning with saving $1000 in an emergency fund as quickly as you can. Let's move on now to the next step of paying off that credit card debt.
Now they're called baby steps but depending on the amount of your debt this may feel a lot less like a baby step and more like a giant leap for man kind.
The good news is that you only focus on one debt at a time. In Dave Ramsey's debt snowball baby step 2, you list out all your debts in order from smallest amount owed to largest amount owed not counting your mortgage if you have one. For me that list was longer than I'd like but I was motivated to see it gone. Like I said last week it was really eye opening to see the payments I was making on debt that I could have been spending on other way more fun things. (like more house projects, how about that). Once all the debts are listed in order you start attacking. Starting with the smallest debt you put ALL the extra income you can on paying off that debt as quickly as possible while making minimum payments on everything else. The trick to this is changing your lifestyle as well. You have to say no to eating out, buying games/shoes/clothes you don't need, for me it meant not buying home decor or doing house projects.
You have to get creative to make this process go quickly too. I cut cable, my sister got on my cell phone plan which actually saved me about $20 a month and saved her about half the amount she was spending. I turned my thermostat up about 4 degrees in the summer and down about 4 degrees in the winter and turned off lights when I didn't need them, opened the curtains and let the sun heat the house during the day, unplugged items I wasn't using, anything I could think of to save money. I also severely cut down the number of times I ate fast food. Let's be honest though part of that was for my weight loss I posted about last summer, but who can beat cutting out one thing to help with 2 goals! I started packing my lunch to take to work. Finding cheap ways to feel like I was having as much fun as I did spending money the old way.
Everything extra that's saved goes to making a payment on that first debt. Now you may be asking, why start with the smallest amount owed? Why shouldn't I start with the debt that has the highest interest rate? The answer to that is motivation. It will take longer to pay off the high interest rate debt. When you start with the smallest debt and pay it off ferociously, once it's gone you can take the payment you were making on that debt plus the minimum of the next smallest debt and pay that one off quickly too, then snowball that to the third smallest and so on until your debt is gone. Paying it off in that order allows you to see results sooner. Trust me once you see that first one gone you think, "wow that was quick and it feels so good to have one I can cross off my list!" You take that motivation into the second and just keep kicking a**. So far I have paid off 3 of my debts this year using this method!!!
It feels so good to have the process started. I still have $1000 in my emergency fund and 3 minimum payments I don't have to worry about any more! It's awesome! AND I did that in 9 months and paid off just around $3000. I do have a ways to go, especially on student loans but they're last.
Is this process easy? Absolutely not. You have to be willing to change your lifestyle for this to work. This mess is here for a reason and that's because spending was out of control. So to fix it, habits have to change. No more wasting money. But hey, if you slip up and buy something you didn't need or eat out when it wasn't in the budget. It's not the end of the world. It doesn't mean your whole plan is shot. Don't use that as an excuse to give up. Re-adjust and get back on track. It's the same mindset I have for losing weight. A lot crosses over actually, it makes it easier. :)
So this is me, staying on track. Do what you have to do to get creative with it. I did a balance transfer on one of my biggest credit cards, the interest rate was killing me! Does anyone else have a credit card statement that tells you how long it would take if you only make minimum payments? When you look at that statement and see that if you only make minimums it will take you over 100 years to pay off, something has to change. That is NOT at all a good feeling. So transferring to a much lower interest rate is really helping my sanity.
All my extra money is now going to debt and I'll keep at it until I'm done. I planned out how long this would take at a realistic rate and I'm looking at 3 years. If I put more to it then of course it'll be faster. Now I'm not too into the idea of getting a second job, but I have a money board on Pinterest that has all kinds of other good ideas for side hustles and ways to make extra money. And like I mentioned last week I do have some furniture and different odds and ends I can sell. Honestly I just haven't gotten into all that yet. Right now it seems like a hassle but it might be a hassle that's worth it if I can pay off this debt faster. It's all about figuring out which seems harder. Selling some junk or being in debt. You have to pick your hard.
Anyone else trying this debt snowball method or just paying down some debts? What tricks are you trying?
Sunday, January 21, 2018
Sunday, January 14, 2018
Let's talk about debt.
Hey everyone!
You may have noticed the lack of projects on my part lately. Well that's because I'm trying to refocus my energies on paying off debt. I know I'm not alone in this either as so many people are struggling with feeling like we're living paycheck to paycheck and do you know why that is? DEBT!
How did the debt start for me?
My debt started 10 years ago! When I went to college I took out student loans I probably didn't really need but I was a kid, I didn't know any better I just thought that was the way things were done. I didn't want to put too much pressure on myself to work and go to school in my first year so I took out the loans. It was future Laura's problem to pay that back after I finished college right? Thanks A LOT past Laura! It's not fun!
Adding to that problem I applied for a credit card in hopes of building my credit and working on my credit score. Again I thought that was just how the world worked. That credit card only had a $250 limit, I couldn't get in too much trouble with that right? Wrong! Of course as the years went on I paid minimum payments all on time, they slowly upped my limit and did I take advantage of that? I wish I could say no, but I sure did! I had the best intentions when I started.
"I'll just use it for gas and pay off the balance every month" ---didn't happen
"Ok once I get to a balance of $200 I'll stop using it and just pay minimums until its gone" ---wrongo
"I'll cut up the card if it gets out of hand" ---ya right.
I told myself just about every lie in the book. But that card wasn't the only problem. Need a new car? Better get a car loan. Buying a house? Finance it all. Want a new couch? The store probably has a financing option. Sounds like something all of you have thought before right? I'll just make payments was always the answer, because it's "easier" that way. Well it may be easier to get what you want and immediate gratification but the long term consequences are not worth it!
How did I realize I needed to do something?
My get out of debt plan started so many times it wasn't even funny. The feeling of living paycheck to paycheck was never a good one. Payments were always made on time but then there was no leftover money for anything more than minimums and it feels like you're barely getting by. Then you do the taxes at the end of the year and report your yearly income and you think, "I made THAT much!? Where the h*** did it all go???"
So the plan was to try to be frugal and not spend more than was needed. But then things came up that just "needed" to be purchased. Some legit but others not. Car repairs - legit. Dr visits - legit. Vet bills - legit. But then there was going to a movie because we deserve it - not legit. fast food even though there's food at home - not legit. New TV - not legit. New couch - not legit. You get the idea.
I really got serious about it in 2017. Sometimes things happen that force you to review your finances and re-evaluate if you can keep living the way you're living. I wrote out all the monthly payments that were being made and really saw how much was going to minimum payments with little to no change on the balance of said debt. That feeling was like walking up the steps on an escalator that's going down. You're climbing and climbing and working so hard to do it but not really getting anywhere. Also totaling up those payments I was making on just debt and seeing the number that I could have to spend on other things if I didn't have the debt. Something needed to change! Could I survive doing what I was doing? Yes, but that's all it would be, just surviving. That's not good enough no matter how you try to justify it.
Where do you start? It seems overwhelming!
That's not a lie, it is overwhelming! But my first step to any project is Pinterest so that's where I started this time. I saw Dave Ramsey's total money makeover all over the place! I bought his book through my Amazon kindle app and this was a couple years ago (one of the many times I started and then started again). He puts getting out of debt into "baby steps" which really helps simplify one goal to strive for at a time.
I would highly recommend reading his book. Although at the time I read it, it all made sense and looked like it could really work but it wasn't the right time to change my lifestyle. Do I wish now I had started then? Abso-freaking-lutely. But I didn't and you can't change that. You can only deal with what is right now. So beginning of last year, my lifestyle was already going to change so why not start this financial makeover too!
Currently in this program I'm at baby step 2 Debt snowball! Step one saving up a $1000 emergency fund as quickly as possible is where I started. I used tactics I still use in step 2 to save it up. If I got birthday money, it went to savings, Christmas money all got stashed there too, bonuses from work - into savings, get a raise at work - the extra on top of what I made last year - into savings. ANY extra money laying around gets stashed there. I was lucky enough not to need to sell anything to save that thousand up but I do have things lying around I can sell (more on that in a minute). I was worried that if I saw that cool Grand sitting in my bank account that I'd be tempted to spend it, but really it hasn't been that way. I know it's earmarked for emergencies and only true emergencies like car repairs, or fixing the furnace, or roof leaks or whatever could go wrong around the house. I don't rent so it's up to me to cover those costs. Emergencies are not new clothes, or furniture, or fast food. I just put my blinders on when I look at my savings account and actually it makes me really happy to see that money sitting there in case I need it. :)
So if you are just starting this journey or if you have started it so many times it's ridiculous like it was for me, start with an emergency fund. Having the money around if needed helps so you don't have to use credit cards to pay for emergencies and get trapped or deeper in the trap of credit card interest rates and monthly payments that could be spent on other way more fun things.
I'll talk more in another post about my journey in baby step 2 but until then, is anyone else tired of being in debt and making payments not getting anywhere? Who else has heard of Dave Ramsey or tried his Total Money Makeover?
You may have noticed the lack of projects on my part lately. Well that's because I'm trying to refocus my energies on paying off debt. I know I'm not alone in this either as so many people are struggling with feeling like we're living paycheck to paycheck and do you know why that is? DEBT!
How did the debt start for me?
My debt started 10 years ago! When I went to college I took out student loans I probably didn't really need but I was a kid, I didn't know any better I just thought that was the way things were done. I didn't want to put too much pressure on myself to work and go to school in my first year so I took out the loans. It was future Laura's problem to pay that back after I finished college right? Thanks A LOT past Laura! It's not fun!
Adding to that problem I applied for a credit card in hopes of building my credit and working on my credit score. Again I thought that was just how the world worked. That credit card only had a $250 limit, I couldn't get in too much trouble with that right? Wrong! Of course as the years went on I paid minimum payments all on time, they slowly upped my limit and did I take advantage of that? I wish I could say no, but I sure did! I had the best intentions when I started.
"I'll just use it for gas and pay off the balance every month" ---didn't happen
"Ok once I get to a balance of $200 I'll stop using it and just pay minimums until its gone" ---wrongo
"I'll cut up the card if it gets out of hand" ---ya right.
I told myself just about every lie in the book. But that card wasn't the only problem. Need a new car? Better get a car loan. Buying a house? Finance it all. Want a new couch? The store probably has a financing option. Sounds like something all of you have thought before right? I'll just make payments was always the answer, because it's "easier" that way. Well it may be easier to get what you want and immediate gratification but the long term consequences are not worth it!
How did I realize I needed to do something?
My get out of debt plan started so many times it wasn't even funny. The feeling of living paycheck to paycheck was never a good one. Payments were always made on time but then there was no leftover money for anything more than minimums and it feels like you're barely getting by. Then you do the taxes at the end of the year and report your yearly income and you think, "I made THAT much!? Where the h*** did it all go???"
So the plan was to try to be frugal and not spend more than was needed. But then things came up that just "needed" to be purchased. Some legit but others not. Car repairs - legit. Dr visits - legit. Vet bills - legit. But then there was going to a movie because we deserve it - not legit. fast food even though there's food at home - not legit. New TV - not legit. New couch - not legit. You get the idea.
I really got serious about it in 2017. Sometimes things happen that force you to review your finances and re-evaluate if you can keep living the way you're living. I wrote out all the monthly payments that were being made and really saw how much was going to minimum payments with little to no change on the balance of said debt. That feeling was like walking up the steps on an escalator that's going down. You're climbing and climbing and working so hard to do it but not really getting anywhere. Also totaling up those payments I was making on just debt and seeing the number that I could have to spend on other things if I didn't have the debt. Something needed to change! Could I survive doing what I was doing? Yes, but that's all it would be, just surviving. That's not good enough no matter how you try to justify it.
Where do you start? It seems overwhelming!
That's not a lie, it is overwhelming! But my first step to any project is Pinterest so that's where I started this time. I saw Dave Ramsey's total money makeover all over the place! I bought his book through my Amazon kindle app and this was a couple years ago (one of the many times I started and then started again). He puts getting out of debt into "baby steps" which really helps simplify one goal to strive for at a time.
I would highly recommend reading his book. Although at the time I read it, it all made sense and looked like it could really work but it wasn't the right time to change my lifestyle. Do I wish now I had started then? Abso-freaking-lutely. But I didn't and you can't change that. You can only deal with what is right now. So beginning of last year, my lifestyle was already going to change so why not start this financial makeover too!
Currently in this program I'm at baby step 2 Debt snowball! Step one saving up a $1000 emergency fund as quickly as possible is where I started. I used tactics I still use in step 2 to save it up. If I got birthday money, it went to savings, Christmas money all got stashed there too, bonuses from work - into savings, get a raise at work - the extra on top of what I made last year - into savings. ANY extra money laying around gets stashed there. I was lucky enough not to need to sell anything to save that thousand up but I do have things lying around I can sell (more on that in a minute). I was worried that if I saw that cool Grand sitting in my bank account that I'd be tempted to spend it, but really it hasn't been that way. I know it's earmarked for emergencies and only true emergencies like car repairs, or fixing the furnace, or roof leaks or whatever could go wrong around the house. I don't rent so it's up to me to cover those costs. Emergencies are not new clothes, or furniture, or fast food. I just put my blinders on when I look at my savings account and actually it makes me really happy to see that money sitting there in case I need it. :)
So if you are just starting this journey or if you have started it so many times it's ridiculous like it was for me, start with an emergency fund. Having the money around if needed helps so you don't have to use credit cards to pay for emergencies and get trapped or deeper in the trap of credit card interest rates and monthly payments that could be spent on other way more fun things.
I'll talk more in another post about my journey in baby step 2 but until then, is anyone else tired of being in debt and making payments not getting anywhere? Who else has heard of Dave Ramsey or tried his Total Money Makeover?
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