While cooking dinner today, I was listening to a podcast discussing various methods to pay off debt. During the podcast, the hosts were speaking of a woman who was comparing the “Debt Snowball” method of Dave Ramsey to paying the debt with the highest interest first. In her opinion, paying higher interest first was a no-brainer because it costs less in the long run.
One of hosts mentioned that the reason some go for the”Debt Snowball,” starting with the smallest debt balance then moving to the larger, is to get a sense of satisfaction and accomplishment as you eliminate debt after debt. I totally agree!
In trying to pay down our debt, starting with the highest interest rate which was also our highest balance credit card, it seemed like the balance barely moved and I was often discouraged. Not only was I discouraged, but it was enough to think there was no point. We had multiple student loans and multiple credit cards, I really couldn’t see a reasonable end. Now, since focusing on smallest balance, we’ve paid off 3 of 4 student loans and 1 credit card. Also, those minimum payments that are no longer there have been shifted to pay off the next balance.
This last month has given us so much hope and I feel a sort of control again. We are taking this debt down!
What are your thoughts? How did you pay or how are you paying off your debt?
It’s that time again! Time for bills and goal progress! From prior posts, my current focus is GETTING OUT OF DEBT! The stress of it needs to go.
According to my “Bills Budget,” this period’s paycheck covers the expenses below:
I’m not certain what happened with our Electric bill this month but as soon as I received the bill I called our Electric company to set up a free Home Energy Analysis. I also prepped my landlord in case there are repairs they will need to make. I have never seen a utility bill so high!!
Also, based on the steps completed from The Plan, I have an extra $648 to apply to debt BUT since the electricity is so high that drops to $393, still something. After paying these bills, what is left from our pay is $2,600. We are taking $900 for groceries, Christmas dinner, gasoline and other things we may need for the family over the next two weeks. The remaining $1,700 is going toward paying down the last open Student loan account.
Here is what our debt looks like today, down another $1,400 since 12/07:
Still feeling good about our progress. I estimate we can be out of debt in the second quarter of 2019 if we keep it up. Thanks for reading and the support. Also, I created an Instagram account. Find Financially Me on Instagram @financially_me. Will keep you posted of any changes!
I recently had an update call with my Financial Advisor and let me say I left that call in SUCH a great mood. I updated him on the progress we had made and he just genuinely expressed how happy he was that we stuck with the commitments we made. I think for my family, its important to have someone we can talk to about our plans and seek advice, even if that advice isn’t necessarily profitable for the Advisor at that point in time.
Let me tell you, talking through the items crossed off The Plan and being congratulated for each just felt good. I like a pat on the back from time to time!
We got paid on Friday! And now it’s time to pay some bills. Looking at our “Bills Budget” we have $4,837 in payments to make, made of up the items below:
My 401k deductions stopped this paycheck, so I do have that extra money to pay down debt. After taxes, we received $6,473.80. After paying bills, the balance is about $1,600. We are taking half of that for groceries, gasoline and other things that come up over the next two weeks. The other $800 is going toward paying off the balance of Credit Card 1.
After making this additional debt payments, AND completing Steps 1-5 of The Plan, our debt now looks like this:
We have paid off $18k since we started. When I look at this number, even though we have pulled money from savings, I feel quite a bit of relief! If we have any interesting updates prior to next payday, I’ll be sure to write about them! Until next time…
I was listening to a podcast and the host mentioned she shops her car insurance every 6 months. Reason being is because Insurance companies regularly offer new incentives and discounts that are available to take advantage of. I have been with my car insurance company for 12 years!! It’s definitely time to shop.
I used a website called coverhound.com to shop multiple insurance companies at once. As you may remember, we pay $365 per month in car insurance for two leased vehicles (for a 6-month premium of $2,162.26). On CoverHound, we found a major insurance company offering the same limits for $1,489.74! This saves us $672 ever 6 months! Aww man why didn’t I think to do this sooner?
We are moving forward with purchasing the new policy and that extra money will help pay down our debt even faster. I’m really happy with this.
Tomorrow, is Payday! so look for an update on bills being paid, remaining debt balances and what we have to pay toward reducing debt. As always, if you’re enjoying this blog, please like and share it.
Here are some updates from “The Plan” mentioned in my “I’m Tired of Debt” post.
From Step 2: I checked my bank account and see that we received the withdrawal from our investment savings account in the amount of $6,909. I used that money and paid off the largest student loan balance we had which ended up being $6.913. We used a few dollars from our 2-week House Fund to cover the difference.
From Step 4: We received the check from my 401k loan in the amount of $4,795.21. There was a small processing fee deducted from the balance I withdrew. Once the check clears, I’ll make a payment to the next largest Student Loan to bring down that balance. Looking forward to it!
I think once I get my next paycheck, I’ll update all of the outstanding debt balances to get a glimpse of where we are now. Already feeling a some satisfaction!
Payday was actually yesterday but I’m going to handle all of our payments today. As mentioned before, I use a “Bills Budget” to take the thinking out of what needs to be paid from each paycheck. I make all of those payments on Payday and what I’m left with goes to support the Household. From this paycheck, my Bills Budget shows I am to pay $4,166 made up of the bills below:
Our pay after taxes is $6.392.57. It looks like my 401k deductions are still occurring so that extra money isn’t available to pay debt. Also, my Investment Savings notes $415, but I’m taking $315 of that to pay debt. Also, we decided to postpone Gift and Travel savings given I’m expecting. I will remove those from my Bills budget for next payday. Now that bills are paid, we have about $1,800 remaining. I am going to set aside $800 for groceries, gasoline and just living for the next two weeks. The remaining $1,000 is going to pay down Credit Card 1 which has a balance today of $2,617.55.
Alright, bills are paid! Extra debt payment made! I’ll post again before next payday for any interesting updates as well as once the money from steps 2, 4 or 5 of my payoff plan come through. Check out the “I’m Tired of Debt” post for a reminder.
I am tired of debt and have a renewed focus to clear it up. We sat down and made a plan, using money from various savings vehicles we have to get started. Here is what we have saved up:
So here are the components of “The Plan”:
- Pause our 401k contributions. Take those dollars and apply them to paying off our debt. I contribute about $200 per check to my 401k. Once I receive a paycheck without the contribution, I’ll see how much we can apply to debt.
- Withdraw $6,909 from Investment Savings account and pay off one of the Student Loans. That Student Loan has a minimum payment of $71.92 that we will apply each month to debt
- Reduce our Investment Savings account contributions by $681.85 each month and apply to debt
- Borrow $4,847.27 from 401k and apply to one of the Student Loans that has a balance of $5,419.37. I’ll end up paying back that 401k loan at 6% interest to myself over the next 5 years
- Sell stocks which should yield about $4,000. Use those funds to pay off the balance of the $5,419.37 Student Loan ($572.10). That Student Loan has a minimum payment of $56.44 that we will apply each month to debt. Use $2,663 to pay off another Student Loan. That Student Loan has a minimum payment of $28.75 that we will apply each month to debt. Finally, I’ll take the last $765 and apply it to the last Student Loan of the account.
- Each pay period, we will apply the minimum payments no longer due to a debt account until it is paid off
I’ll give updates with each pay check, every two weeks, in a post called Payday!
Sometimes when I read other blogs, I can’t relate as much because I have a hard time finding the family facts. What is the family make up? What is the income, what monthly expenses are there, etc. If I find that helpful, maybe others will too.
In our household is myself, my Husband, both in our mid- 30’s, my Mother, our 2 year old and soon to be new born. Both my Husband and I are working and we are fortunate to have my mother home to take care of our child.
After taxes, we take home $204,000 annually. Our monthly expenses are below. In addition, we get paid bi-weekly so we utilize a “Bills Budget” I created to identify exactly what gets paid from each paycheck based on their due dates and how much money we have to work with. I create this for the full year and it has been a critical in managing our base budget.
Another thing that is important to our family is being able to travel, give gifts and have spending money for entertainment. We put aside money from each check for those. Now, I know that may seem like an unnecessary expense, especially when trying to get out of debt, but we are going to try to balance it (for now!).
Our total debt is listed below
In the next post, I’ll write about our plan to get this paid off! I’m sure over time, we may find better ways to do things, but I’ll keep everyone in the loop. If you’re interested in hearing more about the “Bills Budget” just let me know via email at email@example.com, comment or the Contact page. If you’re enjoy this journey, and think others may too, please share!
Thanks for joining me! I created this blog because I wanted to share the ups and downs, highs and lows of building my family’s financial house. I have been reading a number of financial books, listening to podcasts on a daily basis and realized my family can benefit from some financial improvements. Continue reading