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 Debt Snowball – February

In January we began our Debt Snowball, per Dave Ramsey’s Total Money Makeover.  Check out the beginning of our Journey HERE.

In January we started to tackle one of our student loans, which had a total balance of $2,993.52.  Through lots of budgeting and scrimping we were able to pay off $1,520, leaving us with a balance of $1,485.16 after interest was added.  Our student loan had a monthly payment of $127, which we paid, and then added in every extra dollar we could spare.  I was pretty impressed that we were able to scrounge up that extra $1,520!

So for February we got that snowball rolling.  We were able to pay off the balance of that student loan, and start in on our next debt!  It was so satisfying being able to make the final payment on our first debt!  Cross one off of the list!

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So satisfying to see a $0 balance on our first debt!

Now, we take that $127, that we were paying on the loan, and roll it into the next on the list…a credit card balance.  Our second debt, a credit card that started with a balance of $1,895.52 is up to bat.  This has a monthly payment of around $60, but we are now able to add in the $127 from our previous loan, and automatically we can now pay $187 without changing anything in our budget.  But who wants to pay the minimum?  We want our snowball flying down the hill!

In addition to the saving and budgeting techniques that we used  in January we had a few extra income opportunities that were able to really help us pay down our debt this month.  My husband coaches two high school sports, and he received both stipends this month.  We generally take his stipend and spend it on a vacation, this year we divided it into quarters.  One quarter went into the vacation fund, one quarter into his spending money, one quarter into savings, and one quarter right into the debt snowball.  For the month of January this was an extra $1,500 that we applied straight into debt.  It helped take a huge chunk out!  I also received a bonus at work, since that was surprise income we applied it right to the debt as well.  These aren’t typical incomes, so we won’t be able to pay off this much at a time on a regular basis each month, but getting the momentum going and seeing our debt really start to lower has been so rewarding.

At the beginning of February we still had $1,485.16 left on a student loan…gone!  Then we moved onto a credit card with $1,895 which is now down to $315.52!

So far in 2016 we have paid a total of $4,593 in debt!  And it’s only been two months!  In March I know that we will be able to finish off that credit card, which now means when we move onto our 3rd debt we will be paying the $172+$60+the minimum payment.  That’s an extra $182 a month that we are adding to our snowball.

We are still continuing to add to our house savings account, but paying off our outstanding debt is really getting fun.  My husband starts a new job in a week, and his first month on the job will be a real pay cut, so I am definitely glad we completed the first step of Dave Ramsey’s Total Money Makeover, which was setting up a $1,000 emergency fund.  Hopefully we don’t need it, but if we do, we know it’s there.

And then in a few weeks I start my new job, I received a promotion at work, so they extra income will help with the decrease my husband will be seeing.  And then as his salary starts to increase we can take the extra and roll it into our snowball.

I’m excited to see if we can keep the momentum up.  What budgeting techniques do you use?

Check out a copy of Dave’s book here, I highly recommend it!