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