Snowball

Between bill-paying and tax-doing, Sunday was a bit of a financial bummer. That hopeless, we'll-never-get-out-of-debt feeling came over both of us. I hate that feeling almost as much as I hate the feeling of owing anyone money in the first place. But by 10:30 at night, our taxes were almost done and (if I did everything correctly) we'll be getting a little bit of money back for once. It will promptly go into debt repayment, thank you very much. (This will be the very first time that has happened, by the way.) It will barely make a dent.

So I spent yesterday devising a plan. Working the numbers, and reworking them. Laying out the if/then of our financial future. And by the end of the day, I have to say I was pretty pleased with the results.

My plan to get out of debt started by creating a debt snowball a la Dave Ramsey, and yours can too. If you haven't read Total Money Makeover I bet your local library has it. This book is where I was introduced to the debt snowball, and it shows you how to do it. The basic idea is to figure out how much extra money you can put into your smallest debt, pay it off, and then add the full payment you were making to that debt to the money you are sending in for the next debt. I created mine in the spreadsheet available in Google Drive (which is free), and ended up with a multi-year plan that tells me how much to send to each debtor every month, and when we will be debt free. I also added in my income and other expenses into the debt snowball, and I created formulas to calculate income vs. expenses, and calculate and add in interest on loans and credit cards. In this way, my debt snowball document also acts as my budget.

I'm a worrier, especially about money. Creating a plan of action like I did with the debt snowball makes me feel better today, and will hopefully get me to a better tomorrow. My snowball says that if I'm really, really careful with my money, shuffle some things around, get a job, and sell our house in the next few months, we could be completely out of credit card debt by... wait for it... DECEMBER. Wow. Just wow.

If we continued to live on a really tight budget, we could have our remaining debt (which consists solely of student loans) paid off by May 2015. The move and this month's buy nothing challenge have helped us start to break our spending habits, so living on a really tight budget doesn't seem so hard anymore.

Is my snowball unrealistic? Probably. Okay, definitely. There are a lot of ifs attached to its success. But seeing that it is possible to be out of debt before my 40th birthday is pretty darn motivating. It will help me fight the urge to buy something if I can say to myself, "Would you rather have this shirt/book/gadget/contraption/event/yarn/pretty now, or would you rather be completely out of debt in two years?" That makes it easier to say no, doesn't it?

Likely, things won't go perfectly, and I doubt that I remembered to budget for every single thing that will come up. It will probably take me a bit longer in all honesty. But we will be debt free significantly faster than if I had no plan at all.

I'm excited, people. 

Have you used a debt snowball? Did it help reduce your debts?

Edit: This is not the first debt snowball I've created. Sometimes you get off track, or your financial situation changes, and you have to update or redo your plan. But the point is to have a plan - without it, I doubt I'd ever pay much more than my minimums. Being able to see the results of my efforts motivates me to find more ways to pay down those debts faster. The debt snowball helps obliterate that hopeless feeling and helps me see that I CAN DO IT!