Snowball budget
So I have decided to use the snowball method for getting out of debt. It sounds simple and effective. I hope so, I am tired of being in debt. This is in no way going to get me out of debt quickly but it will put me on a path that allows me to see progress. Hopefully if I am able to stick to the plan I can be completely debt free in about three years. And be caught up on all my adult responsibilities by year five.
Here is a basic run down of the Snowball method for paying off debt. I’m sure everything will sound obvious and much of it will be redundant. But I’m hoping being very clear and upfront from the start I will be able to integrate these habits into my life.
- List out all debt (All of it, even the 30 bucks you owe blockbuster.)
- On your list of debts list the amount you owe and your monthly minimum payment.
- Figure out the absolute minimum payments for each debt. This should work out to all the interest plus one percent.
- Write it down! This method is useless if you do not meticulously keep track of everything.
- Now work out a personal budget. This should be all of your personal expenses for a given pay period. (Gas, food, movies, etc..)
- Do not create a personal budget you cannot stick with. This method requires you to know exactly how much you are going to be able to spend on bills per pay period. Honestly starting out I would recommend adding an extra ten percent just to make sure you can make it through to the next pay check.
- Now take the total of your personal budget and subtract the amount from your paycheck. The left overs will be used for bills and savings.
- Add up the total of your minimum payments and subtract the total from your bill money.
- Take ten percent from the rest of your bill money and place it in savings.
- Take the resulting balance of your bill money and pay the lowest debt. (I recommend blockbuster)
The goal of this plan is to keep all of your debts from getting any larger, while knocking out the easiest ones. I hope it works out. I’ll definitely supply update as I progress through the journey of debt freedom.
