1. Admit your poor choice 2. Do not blame others 3. Say you are sorry…
Operation Get My Life Together: The Debt Snowball
I mentioned in yesterday’s post about my envelopes and my cash flow system to help us get out of debt. I want to stipulate that, as of now, I DO NOT add my house into this snowball debt. Let’s be real, folks….its kind of like me being fat…the fat did not accumulate in a day and it will not be gone in a day. I want to set attainable goals to keep me motivated and that is what I’m going to do. Will we, eventually (prayerfully) get out house paid off quicker…yes…but my main goal is to get this other debt gone and be on a cash only plan for purchases in the future.
I stumbled on this wonderful website for DEBT SNOWBALL – ing. This is good for those visual people, like my husband! There is also another cool site on Debt Reduction that is really good, as well. Both of these sites are free and easy to use.
The debt snowball is listing all your debt from SMALLEST to LARGEST. Again, I’m excluding my house for now.
For us, that would be:
- student loan
We owe the lowest amount on our van (I’m not even looking at interest rates). My monthly payment on my van is $240, but only $220 goes towards the principle. The rest goes towards interest.
For the MONTH OF SEPTEMBER only, this is what we have to throw down on this debt.
Mthly pymt: 240
Kids bills: 110
2 Travel checks: 282
Extra check: 125
Leftover from August envelopes: 453
Zero out extra: 645
This is a total of $240 regular payment + $1615 that is added directly to the principle.
If we were to continue ONLY paying the $240 a month, we would have 3 years before this is paid off. With doing a ZERO BASED BUDGET, we will have this debt PAID OFF by December of 2017. Anything extra that comes in..we put in our debt envelope. We just continue building it up to pay this off.
Now, starting in January 2018, we will ROLL that $240 van payment that we no longer, technically have, and we will add it to our next debt…my student loan. Let’s look at the projected monthly amount we can throw at that bill in January.
Mthly payment: 183
Kids bills: 150 (yes it went up only because we were not having our daughter pay anything for a month because of her financial issues)
Extra check: 125
Zero out extra: 645 (this should always remain the same)
Old Van payment 240
I cannot calculate his OT or his travel check because these may not come through this month. With ONLY those few things….we can pay the $183 regular payment and then add on an EXTRA $1,160 to our principle. If I just pay the minimum amount, I will pay this bill of January 1, 2031. By adding on this EXTRA, I can have it paid off by by the end of next year….maybe sooner if I added in that OT, travel and anything extra we might get.
After this is paid off, we have our equity loan. We have our regular payment of $115, but then we add the kids bills, extra check, zero out extra, old van payment, and old student loan payment. We will pay $1458 per month.
Then we move onto the house…..
Seriously…………..this is doable. I’m excited. Big Daddy is excited. We have been painfully disciplined and we do not spend if our envelopes are empty. We have not used our debit card and we do not own a credit card.
Please if you have any questions, let me know. I’m happy to answer them.