Ditching Debt #50_before50
The second BIG goal in my #50_before50 project is to ditch our debt.
See all #50_before50 goals here
I am embarrassed by the amount of debt we have.
In the realm of normalcy our debt is below average for our age bracket and income level. But it is more that I am comfortable with.
And, to add insult to embarrassment, we were nearly out of debt 3 years ago. But a job change coupled with difficulty getting paid depleted our savings and sent us back to utilizing credit cards.
So while our income situation has straightened out, the debt we created, and then continued to create, continues to haunt us.
Plans to Ditch Debt
While the debt we have isn't small, we have, as Dave Ramsey often says, a large shovel. We are blessed with a very comfortable income and our situation is completely our fault, owing to laziness, impatience, and failure to follow through.
Yes, I said it, we are completely to blame and no, unlike the debt management services all claim, the credit card companies and lenders are not at fault.
So, how do I plan to ditch a significant amount of our debt in one year? I'm glad you asked!
Deplete Debt Step 1: Debt Snowball
The debt snowball idea has been around for years, though I didn't hear it called that until the first time I heard Dave Ramsey on the radio nearly a dozen years ago.
It's a method that involves listing your bills smallest to largest an paying them down in that order, regardless of interest rates.
As one debt is paid off you roll the monthly payment from that debt into the next debt, therefore increasing the monthly payment and making your ‘snowball' larger so it can take out debt more quickly.
You also want to use a ‘zero based budget' for this plan so you can track every dollar that comes in. And any extra money at the end of the month goes toward debt.
We've done this before- as I said, we were nearly out of debt a few years ago- so we know it works.
Deplete Debt Step 2: Cut Costs & Sell Stuff
I've trimmed our budget as far as it can go right now, but I am always looking for more cuts I can make.
Honestly, it feels like a ‘win' when I can remove something or lower the monthly cost on our budget sheet.
I am also in constant ‘declutter mode'. Though a lot of items leave our house destined for the Salvation Army I am trying to be better about taking good quality used clothes to consignment shops and listing items on Marketplace.
Deplete Debt Step 3: Recognize the WINS
If you look at my goals you will see that paying off debt is #9, but the next 7 goals are all related to it.
I call these ‘micro goals', or the steps I have to complete to get to the big goal.
My hope is that marking those off as they fall will give me the inspiration to move on to the next, and larger, step with force and positivity.
Deplete Debt Step 4: Increase Income
The bad thing about being self-employed is that you can't really budget your income. Sure, you can make projections using the previous year's numbers, but there are no guarantees.
The good thing about being self-employed is that you can change how you do things. You can create new partnerships, add new products, expand the outlets that offer your products, and even build a completely new income stream.
I have all of these plans floating around in goal steps 27 thru 36. Hopefully I will see more success than failure and that will show in my monthly income.
Patience is a Virtue I Don't Possess
I probably should have put ‘gain patience' as my 50th goal for this year.
Looking at the debt goals laid out above it looks simple. Follow the steps, it will all happen.
But we all know that life, family, and a dozen other things will get right in the way.
Especially since a few of my goals are travel related- and not cheap travel. Holding off on the larger travel goals until the debt is paid down will be the most difficult part of the entire challenge (see impatience, mentioned at the beginning of this post).
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This has been exactly my story for the last two years and I JUST started using Dave Ramseys snowball method. I was not clear on the idea that you roll the min payment of the paid off debt into the next goal on the pay off list! Thanks for clarifying…great information!
Debt is one of those things that has a way of ‘sneaking up on us’. It is so true that when you spend actual cash you feel it, but when you spend virtually- on a credit or debit card- you don’t recognize it.
I am trying to do more with cash and debit, so it is better tracked. And to get rid of credit completely.
Hope all is well with you!