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?
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