Hello Travelers.
And thank you for patiently waiting for this final installment of Let’s Discuss Debt.
As I sit here writing this, I am on hold with my old mortgage company as they have sold my mortgage to another company and NONE of the information is correct - from taxes to balance. Thank goodness I follow my amortization schedule and write checks for the mortgage each month. In fact, I write only one check every month and it’s to the mortgage company. But I digress….
Today we’re going to talk about getting rid of debt for good. In article two, I showed you examples of how to keep track of your income and expenses and also showed you an example of using charts to keep track of your debts. Now, I’m going to give this information to you again in a shorter form. Ready? Get your pencil or take a screenshot.
Here we go:
List all your debts from smallest balance to largest balance.
Go after the SMALLEST debt first. Put any extra money you can towards this debt - even it’s just $5 - $20 each month. You can do this by lowering your SPENDING (Remember the article on “Finding Free Money) which in turn, ups your income While you’re attacking the smallest debt, keep paying the minimum on the rest.
Once you’ve paid off the smallest debt, take everything you were paying on the smallest debt and add it to the minimum amount payment of the second debt.
Once you’ve paid off the 2nd debt, take everything you were paying on it and add it to the minimum amount of the next debt and then move on to the next, then the next and the next. Keep going until you’ve paid off everything!
By starting with the smallest debt first, you get a quick win early on and can stay motivated to continue. And before you know it, you’ve paid off all your debts and are now debt free. Because you don’t have to owe, you’re not tied to minimum payments or payments in general and your income isn’t held hostage.
The Credit Snowball is a debt-reduction strategy - not a get-rich-quick scheme. It doesn’t cost any money to do it, just discipline and motivation. The concept of “winning” when it comes to money is 80% behavior and 20% head knowledge. The only person who is stopping you is you - if you don’t change your behavior and relationship to money and debt.
Back to the mortgage - over the past year I’ve been adding an additional $50 every month to my monthly mortgage payment. Doing this, I’ve managed to knock the balance down by $11,000.
Hard work? You bet! Have I had to cut down on spending - yes! But seeing my credit card bills and mortgage go down faster than I ever expected it to has kept me motivated. And although I’m not where I want to be (yet), seeing the numbers come down fast keeps me motivated to continue.
The Holidays are coming and all those “sales and deals” will be all up in your face. Before you whip out your credit card and charge things or before you decide to upgrade devices and vehicles - give it a long hard consideration on whether or not you can just wait or are those things really a necessity. Wants ARE NOT needs.
Yet if you WANT to be debt-free, then you NEED to get a handle on what you’re doing with your money and where it’s going.
If I can do it, so can you. I have every faith you can.
Until then.
Be Good To Yourselves.
Tara, xx
PS: I’d be interested to hear if anyone tries this and let me know how it works for them. Start small and let me know of your success.
Hello Tara,
Thank you so very much for your valuable information and very useful. I appreciate you sharing your words of wisdom on getting out of debt. Best to you!!!