a 7 week series
We are on to week 2 of learning about the baby steps.
This is a 7 week series in which I share how we are implementing the baby steps that Dave Ramsey teaches and how, if your like our family, can make this happen.
From my last post: “I’ve been thinking a lot about writing this post. The Dave Ramsey baby steps is what are family is following to get ourselves out of debt once and for all. A 7 week series to get you started and explain first hand the steps, from a mom of 4 perspective.”
When CNBC article was published in August of 2018, the average generation X (my generation), had an outstanding debt of $39,000. Now, our family has almost double that, but we’re climbing our way out.
Ok, here is what Dave says:
“PAY OFF ALL DEBT (EXCEPT THE HOUSE) USING THE DEBT SNOWBALL.
Now it’s time to pay off all that nasty debt. Start by listing all of your debts you owe on outside of your mortgage. The cars. The student loans. The credit cards. The store cards. The gas cards. (Yikes, that’s a lot—but don’t stop now!) Put them in order by balance from smallest to largest. Don’t worry about interest rates unless two debts have similar balances—then you’ll list the debt with a higher interest rate first. This is called the debt snowball method, and you’ll use it to knock out your debts one by one.
Next, attack the first balance on your list. Pay as much as you can each month while making the minimum payments on your other debts. Go after it! Sell everything you can. Get a second job. Sell so much the kids think they’re next! You want to get rid of that payment quickly. When you’ve paid it off, add those payments to the monthly payment on your next debt and start attacking it.
It’s hard work, but this is what winning looks like! The small wins you make at the beginning will keep you motivated to dump all your debt. And before you know it, you’re debt-free! Millions of people have used our proven program, Financial Peace University, to learn how to never worry about money again.”
Here's what you do
I want you to print off the free pdf above (it’s under my free resources and an email is sent with the password). Then I want you to write down every single debt you have. YES, EVERY SINGLE ONE. Will it be scary? Yes. Can you do hard things? Yes. Put them in order of smallest amount owed to largest amount.
Write down the minimum payments that you pay towards those debts, what is the interest rate, and then the fun part begins. How much in minimum monthly payments do you pay out every month? Yeah, this is when I about had a heart attack. For us, it was an average mortgage payment in just minimum payments. Now imagine what you could do with that amount of money per month if you didn’t have those payments? Go ahead, take a moment….could you travel? Buy a house? Save for retirement? Fund your kids college for the future? The possibilities are endless.
now come up with a budget
I can’t stress this step enough. Do you actually know where your money goes each month. I can’t tell you how many people I have talked to that don’t have a budget. My mind is blown. How do you guys survive? How do you know if you can afford that power bill? I’m not judging, I’m honestly asking. Maybe it’s because we’ve always had a tight budget that I can seem to gather how people do it without one.
If you’ve never actually done a budget, I promise it’s not hard. You are writing down every single thing that is coming out of your checking account monthly. Go back to your statements, look at your online activity, start writing these things down. Or better yet, use what we use the Every Dollar App. I use the desktop one because I like to see everything big and not on my tiny screen on my phone. You guys, it’s free to use. Yes, you can upgrade to a premium, but I have never felt the need to.
I even recorded a video to help
Ok, now that you have created your budget, do you have any left over money for the month? If you’re anything like us, we never did, so something had to give. I either had to start taking things out of our budget or produce more income. I started by removing things from the budget so that I could have extra moola to throw at the debt.
I got rid of our cable and used Netflix. That alone I think saved us $60 a month. I pulled our grocery budget down (yes, it can be done). I took away things like eating out (it costs us a fortune for our family of 6 to eat out), said goodbye to our YMCA membership that we never seemed to use, and started to run errands on one day instead of 5 to help with our gas budget line. All these little things add up.
What can you reduce or eliminate completely? Be honest with yourself. Do you really need to get that pedicure or do you want to rid yourself of debt? Can you make your coffee at home instead of that $6 drink from a local coffee shop? Do your kids need to be in every activity known to man? I know that one is going to touch a nerve with some of you, but that’s ok. It’s gut check time.
So you’ve come up with a budget you can live with right? Now it’s time to throw every single thing possible towards that smallest debt. We pay minimum payments on everything else and work like crazy on the smallest debt to get it gone. Is your smallest debt still huge in your eyes? It’s ok because you’re getting ready to do everything possible to get it gone.
Can you have a yard sale? Can you sell an extra vehicle you may have? My husband sold his boat and you can do hard things too. Do you have a huge car payment that maybe is over taking your budget? Can you move down in cars? I’m working slowly on this one with my husband.
One big thing I did was sell my extra camera for my business and shaved away anything that wasn’t a necessity for work. I took out my expensive monthly website hosting company and went back to running it myself with my own WordPress site. I stopped giving away product, and started to value my time.
As of today, we have paid off $10,005.32 of debt since November 2018. That is 7 months of hard work. Is it as fast as I want it to be? Heck no, but things happen, emergencies come up that you have to cash flow, and life continues on. Plus, the interest that accrues each month feels like we’ll never get ahead. Keep pushing. Keep going. Don’t give up.
Another thing you can look into if you have a high interest rate credit card is moving it as a balance transfer. I just did this and it is going to save me so dang much in interest.
June was definitely the lowest snowball amount we have paid, but we paused paying anything extra this month to finish cash flowing our only family vacation we took this year. We are also cash flowing my dental work that is needed and the upcoming trip to Sweden to get my daughter there to study abroad. I have decided to fly with her to get her settled because my anxiety level is high thinking about her going to a new country by herself. See…life happens. You’re not alone.