Tired of Drowning in Debt?

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Credit: Pixabay

When I jumped into the planner world online, I discovered lots of Etsy shop owners and YouTubers talking about the Dave Ramsey method of budgeting.  I haven’t read everything by Dave Ramsey, but since I’ve always struggled with budgeting, I decided to see what he had to say.

**NOTE: I am not a financial planner or advisor, I am simply sharing a method that has worked for me.**

Everyone dreams of being debt-free, right?  But how do you actually get there?  There are a million financial advisors who can tell you what to do to become debt-free.  It’s simple – pay off your debts and avoid buying things on credit.  But simple is rarely easy.

And when you have a mountain of debt, even when you’re throwing every extra penny at it, it can feel like you’re not even making a dent.  What I learned from Dave Ramsey was to approach my debts in a different way.

What makes the most financial sense is to start paying off whatever debt you have with the highest interest rate first – that way you save the most interest and reduce your debt faster.  However, when your highest interest rate debt is also your largest debt, even when you’re paying extra, it often doesn’t seem like you’re making any progress.  So people become discouraged and quit making the effort.

Enter psychology.

People need to feel like they’re making progress in order to motivate them to continue their behavior.  So instead of paying off the highest interest rate debt first, Ramsey’s advice is to concentrate on the smallest debt first.  Yes, it doesn’t make the most financial sense to do it this way, because your large debt will still be accruing interest while you pay off the small one.  But – you will see progress quickly, and that will motivate you to continue doing what you’re doing.

Once you have one debt paid off, put that same payment amount towards the next biggest balance until it’s paid off, then repeat.  So, for example, when you pay off your car loan and your payment was $200, then you take that $200, plus whatever minimum you were paying on the next biggest debt, add those together, and make that the new payment amount for that debt.

Following this idea, rather than concentrating on my large credit card balance, I focused on the small balance remaining on a car loan.  Within 6 months, the car loan was paid off.  And the feeling of walking into the bank and paying it off was amazing! To help me keep track of what I’m paying, I created this Debt Snowball Tracker for myself (there are a million versions of these out there, so feel free to grab this one or make one for yourself):

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I currently have four credit cards, a car loan, a bank loan, and a mortgage.  I’m ignoring our mortgage for this purpose, because we will likely move and sell the house before we pay it off anyway.  We did just refinance our mortgage and were able to get a better interest rate and lower our payment, so that will help.

Simply having a visual tracker like this helps so much when you are budgeting and paying bills.  You can see how much the amounts are reduced in a single glance, and when you see that you are getting close to paying off the balance, it helps give you that extra push to get it done.

Once I paid off the first car loan, I have been adding that payment into the bank loan (our smallest remaining debt balance), and in just a few short months, it will be paid off as well.  After that is paid off, I’ll be able to attack our credit card debt and work my way through them as well.  And while I know that this approach doesn’t make the most financial sense, it has allowed me to be successful in making progress, and that’s what matters to me.

Productive and Present

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Credit: Pixabay

I can’t believe it’s already halfway through January of 2020.  2019 flew by and there are some big things on the horizon for me in 2020.  I don’t want to miss anything, so I’m making an effort this year to be more present in the moment.  My mortality has definitely been on my mind more lately and I have things I want to do/accomplish before I shuffle of this mortal coil.

I am working hard on stickers for my sticker business.  I wanted to have 10 products ready when it launched and I’m happy to say that I have over 10 done!  Now, I have to take photographs and get them ready to list and sell.

I’ve also made more headway in paring down the number of planners I’m using.  I’m now down to only 3 – a budget planner and 2 daily planners.  I really need to just jettison my cheap daily planner and use the Happy Planner but I’m resisting that.  Sunk cost theory and all that.  I’ve given myself until next month to get rid of it as I slowly transition everything over to the Happy Planner.  I have the classic size, but I may try out the larger size next time to see if that works better for me.

I have to say, I’m actually loving the budget planner.  I feel like it’s helping me keep better control of our spending.  I’ve also been following some of the Dave Ramsey method to try and pay off our debts.  I would love to be debt free (except for our mortgage) in the next 4 years.  I created some inserts for my Happy Planner – a debt snowball tracker, a savings tracker, and a sinking funds tracker.  So far we’ve managed to pay off one car loan and we’re close to paying off the second.

I created some daily to-do lists for myself and I love how productive I’ve been lately.  I get a little thrill every time I get to check something off my list as done.  And now that I’ve got my under-desk elliptical, I’m getting way more steps in every day.  I feel like I’m off to a good start in 2020.  Now all I have to do is stay consistent.