Okay, okay, maybe I shouldn’t be talking about snow. EVERYONE in my neck of the woods is fed up with the weather. We had had about a zillion days off of school for snow, ice, or frigid temps. But my budget for this month is right on target due to not being able to leave the house!
For anyone who has started a new budget in January, the second month and third months are where you can fix all the things you did wrong in the first month. This month and the following months you may notice that there is not much room in the budget. Learn to track your spending and skin the fat. You might be shocked to find out what you spent in random trips to Wal-Mart or Target or Starbucks. I was shocked to know how I much spent eating out!
When you do a monthly budget, every dollar has to have a name. That means if money is left over it means you have to have a plan for it. If you leave an extra $200 in your checking account, the odds are good that you will find a way to use it. When you have hit your first step of saving $1,000 for emergencies, then any extra money can go toward paying off a debt.
Next, you will write down your bills. Write them in sequential order for what is the smallest amount to the largest. The idea behind the debt snowball is that you put any of your extra money toward your smallest bill first.
When the smallest debt is eliminated, you will put your payment from the first bill + what your payment is for the next bill. If you owed $100 on your 1st bill and $250 on your second, you now will pay $350 after your first bill is paid off. You keep doing this until you have eaten through your debt. Your snowball just gets bigger and it mows down all of your debt!
At the end of our debt snowball, we were knocking off $1100 dollars a month off our student loans! That was so exciting to watch it whittle down each month and know that the debt-free scream was so close! Shawn and I are both super nerds so we had an amazing spreadsheet to keep track of what we sent each month to our debt snowball.
After we finished paying off our debt, we sent all that extra money to Baby Step #3 to save up for 3-6 months of expenses, and once that was done, we saved for a down payment on our dream home.
What would you do with the extra money if you had no debt? How would it change your life?
The possibilities are endless. The only thing left is to begin.
Love,
Stef