My first post! Where better to start than debt snowballing. The man who has made this famous is Dave Ramsey. While I am a little ashamed to be listening to a man who is such a stark conservative and charges people to use his money saving tools — how the hell does that make sense? Spend $100+ to save money? NO THANK YOU MR. RAMSEY — I also can not deny that I love the Debt Snowballing Tool. It is so easy to put your information in, plus it has a fun graphic designs and icons to play with. On an actual practical level, you get a real idea of how long it will take you to pay off your debt.
What exactly is debt snowballing, you ask? Well, it is when you have money allotted to specific debt and you target the smallest debt first because it makes you stay motivated to continue to pay off your debt. When one debt gets paid off, you put the money you were paying to that specific debt and put it towards the next smallest debt. For all your other debts, you pay the minimum to keep your credit squeaky clean.
This works in theory, but if you are like us you might have a debt or two that are small BUT you scored a deal on the APR. For example, we bought a couch and received a 0% APR for two years. It is our smallest debt, but it doesn’t make any sense for pay that one off first. To show an example of how debt snowballing works, take a quick look what our debt is like when applied to the snowball method (a quick estimate of our debt, but you get the point).
With the minimum payments, the debt will be paid off in 2018. Hell no. That is, like, forever away! If we add about $120 extra a month to our lowest debt we can pay off all this is 3 years.
If you look at this neat little graph below, you can see once we finish paying of Credit Card #2, the $180 that was being used for Credit Card #2 goes directly to Credit Card #1. Then onto the big boy, the car loan. Our mortgage and student loans are not counted as I plan to string those along as long as I possibility can. Also, the stupid couch is not on this list because I have that payment totally calculated to the end of the 0% APR.
Look at this adorable little print out (personal to me) you can do from this tool. You are suppose to put it on your fridge and cross off every month. I am a big fan of anything that includes crossing off lists (every time I clean I still want a gold star and a big hug/high five from my partner … like a 5 year old).
So, there ya go! Start snowballing your debt all over town. I will get back to you in 3 years if I actually keep it up. You have to STOP using your credit card for this to work. But Mr. Ramsey, I really needed that rug from Target yesterday… ok, ok. Cutting up the cards for the sake of my relationship and the debt I have already magically achieved by the short age of 26 — in all honesty, you should have seen me at 21. I was a total fucking mess. At least now I realize that credit cards are not actual money that you own; everything you buy will end up costing 3x as much if you use credit.
I hope this gives you some insight into paying off debt! What are your thoughts on this?