snowballing debt

My parents have been talking to me off an on over the past five years or so about their budget plan that is allowing them to pay off debt (they’ll be completely debt-free in August, for the first time since the early 70s) and still live pretty well. They’re following the advice of financial guru Dave Ramsey, and have encouraged me to attend one of his Financial Peace University seminars. Considering that these things aren’t cheap, I’ve opted to make use of free resources, their advice/experience, and the advice/experience of friends.

Recently, a friend was commenting on how by budgeting only $1000 a month and paying down debt using a snowball plan, she could be completely debt-free in just a few years. My initial thought was, “sure, you must not have nearly as much debt as me, or at as high of an interest rate.” And while I was partially correct, I was very surprised to discover that with the same amount of money, I could be completely credit card debt-free in two years and have my student loans paid off in six years.

Of course, this will require a level of discipline I have yet to master, and I’ll need to be more creative about planning for big purchases that occur in frequently. However, seeing the plan laid out before me and realizing that it’s not some unattainable dream has made me much more motivated to just do it already.

The plan starts July 1. I’m going to reassess where I am at that point, and then start tracking my progress, which is also a good motivator.

6 thoughts on “snowballing debt”

  1. Awesome, Anna! I’ve also been consolidating my debt for the past two years. I’m a happy, happy camper every time a credit card and personal loan is paid off. I still have a good amount of debt I hope to have paid off within two years.

    If you’d like to compare notes, feel free to email me.

    Great success to you!

    K.

  2. Anna, does that sum include your rent? I would assume not, as rent/mortgages in #RVA run around that same amount, unless you can sublet or share a place and divide the total among several people. Yes?

    Outside of my mortgage, my monthly bills tend to run around $650-750 (medical + car insurance, FIOS, food, web server lease and electricity/water, cellphone, plus some *SMALL* “extras” like CDs and dinners out).

    I have to be that frugal b/c I’m paying for my own graduate school tuition in cash — no financing — and each tuition bill comes due on the first day of classes. As a result, I need precisely $4008 of raw cash liquidity once every 3 months. Its hard to budget for that kind of cash, but doable.

    I’ve been doing this for over a year now, and while I’m not “saving” much of anything right now, I’m not accruing debt either. That’s similar to what you’re proposing.

    Go get ’em, Anna! If I can do it, you can!

    -Brent

  3. No, this is just for my credit card and student loan debts. My car payments and personal loan are all automatically deducted from my checking account on a set schedule, and I don’t even factor them into my income/expense plans.

    Other monthly bills, aside from rent, are relatively consistent but different enough month to month that I simply make sure I have enough padding to cover them, sometimes dipping into my daily funds to cover the difference. The rest of my income is budgeted out with a set amount per day available for things like lunch/dinner out or something fun, and if I’m going to be doing something that requires more than that, I make sure I spend less on the days leading up to it.

  4. That’s what I figured.

    As a bottom line though, what I’m doing is not dissimilar to your plan. That is, where I am paying cash for graduate school tuition, its still equals out to around $1000 per month in payments, which is what you’re proposing for yourself. Its doable! 🙂

    -Brent

  5. Destroying that debt is a great idea–and I completely agree about skipping the expensive Financial Peace seminar (but then, I am an independent study kind of girl anyway.) Ramsey’s books are full of info and case histories (and EXCLAMATION POINTS!!!) But the plan is straightforward enough. The public libraries carry Ramsey’s books.

    I use Mint to monitor my cash flow, since I am the world’s worst accountant and hate to file and input things. It monitors all my accounts and I can see everything charted and added (plus, completely free.) All online, all the time. Such a relief. It would help you chart your progress too.

    Best of luck!

  6. Good luck to you! I have several friends who have had great success with Dave Ramsey’s theories. The books are in HIGH demand at my library.

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