Our Debt Snowball – August

8 months = $18,412.37 in debt paid off

In January of this year we started our Debt Snowball, partially following Dave Ramsey’s method.  To see the beginning of our journey click here.  This was the year that we hoped to find our home, so by paying down our existing debt we knew we would be able to afford more house.

We are still on Step 2, which can last for months, even years.  During this step,  you make a list of all of your debts from smallest to largest.  You don’t pay attention to interest rates or anything other than total pay off amount.  Then, you tackle the smallest debt first.  You make the minimum payment on everything except for that smallest debt.  On the smallest debt you scrounge around and scrub your budget, every extra dollar gets put onto that debt, until it is paid off in full.  Once you have tackled one, then you move on to the second smallest debt.

In these past 8 months we have been able to pay off 2 student loans, 2 credit cards and a car loan.  Let’s just reflect on that for a minute…5 monthly payments eliminated!  Some months we are able to contribute more, other months are tight and we contribute very little.  But every small bit adds up, so it still feels good.

This month we contributed $1,855 to the debt snowball and then added an additional $2,000 from savings.  Normally we don’t tap into our savings since that is our house down payment, but this month was a little different.

Since it has been 8 months, and we are starting to get serious about starting our house search again, it was time to re-evaluate our current monthly payments.  After checking in with our balances, I realized that what we were currently putting the “snowball” towards was not the smallest balance.  We had a student loan, which had a monthly payment of $262, with only a $2,753 balance left.  By taking the money out of savings, we were able to eliminate that loan completely, meaning that monthly we are now adding $262 into our snowball.

Now that we have re-evaluated what the balances of our remaining debts are, we have a new game plan of what to attack first.  But again, let’s reflect.  We have eliminated 5 debts!  We have paid off $18,412 in debt!  It’s amazing and rewarding to see it working.  Each month we see that amount grow and grow and it becomes that much more motivating.

September will be a tricky one for us.  My husband returns to work after labor day, with a 3 week unpaid hiatus.   He is also returning to a job that does not pay as much as his previous monthly income.  But we are rolling with it, and reminding ourselves that even if we only contribute a little bit each month, it is getting us that much closer to financial freedom.  At least until we sign that mortgage!

Some tips we like to remember when times are tight:

  1. Eat at home instead of in restaurants
  2. Make meal plans so we are spending less and using all of the food we purchase
  3. Pack our lunches for work
  4. After receiving a paycheck pay all the bills upfront that are due before the next pay period to avoid annoying late fees or over draft fees
  5. Only use our bank ATM’s to avoid transaction fees
  6. Eliminate credit card charges, use only cash on hand.  If we don’t have it, then we can’t afford it!
  7. Maintain our $1,000 emergency fund for true emergencies
  8. Make a budget and stick to it!

8 months = $18,412.37 in debt paid off

Our $5 vacation fund

This year as we have set out to save save save, we still wanted to be able to create a rainy day fund without feeling guilty.  We knew our vacation week would be coming up in April, since we weren’t going anywhere we wanted to be able to make it a fun stay-cation.  What better way to enjoy a week than by being able to splurge on fun things without having to worry about the extra money we were spending?

Earlier this year we decided to start a vacation fund….with $5.  How does that work?  Easy!  Here’s how…

Neither my husband or I tend to carry very much cash on us, and when we do it almost already feels like it’s spent.  The balance is already reflected in our bank account, so any cash happening to be hanging out in our wallets feels like bonus money.  We agreed that anytime one of us had a 5 dollar bill, we would put it into the change jar/vacation fund.

Honestly, we didn’t really think it would amount to much, and we were really good about keeping each other honest.  Even if it meant that we had a $20 bill, purchased something small, and received $15 back in change…all in $5’s…straight into the jar it went!  It was hard to part with at times, but it started to feel like a game.

I received a $20 bill in a christmas card, into the jar it went.  Couple extra $1’s hanging out, toss ’em in the jar.  The hardest part was not constantly counting how much money we were gathering!  It was fun to see the jar start to fill up.

Well, last week was finally vacation week, time to break into the vacation fund!

5 Dollar Saving plan!
Our pile of $5’s!

Over the last few months we had managed to collect over $230 in 5’s!  (And a $20 and a few $1’s).  Woohoo!

Some of our vacation splurges included taking our nephew to a museum and out to lunch, nice meals out for us, a night away, a Brewery visit and a stop at our favorite bakery.

Harpoon Brewery
Fleet of beers and the best pretzels ever!
Cupcake Mojo
Yum!

I definitely think it was worth it, and we are debating whether or not to start it right back up again.  How do you create a rainy day fund?