In September 2015, my husband and I began a journey on Dave Ramsey’s Financial Peace plan. I had been listening to Dave Ramsey’s podcasts for months by that time and knew the basics of the plan, and then my husband agreed to attend the class with me. We enrolled and began learning about the plan in more detail and how it can help us move forward toward a great financial future.
One of the best things about Dave’s plan, that most people don’t ever think to do, is the idea that we should focus on one financial goal at a time. Whether that’s saving for an emergency fund or paying off debt, the idea is that if you concentrate on doing that one task with intensity, you’ll have better results than when you tried to do five different things, like saving, investing in your 401k, and paying off debts all at once.
When we started the plan we had four credit cards between the two of us with small-ish balances. These were cards that had been in circulation for awhile, we would usually charge them up making larger purchases (new vacuum, new computer for school) then we would feel accomplished when we paid them off, and then later on down the road, charge something else..the cycle was a little vicious.
This time, however, we decided to close the dang cards for good. Why keep spinning in the hamster wheel with it all? If we were getting out of debt, then we weren’t going to dance around it. Let’s get out of stinking debt!
The first one we tackled had over a $600 balance. First check on the list, and it felt good. This card had been paid off several times before, but gosh, it felt good to pay it off and just close it.
The second card had about a $900 balance, and we paid it off in a few big chunks and again closed that. Next came my husband’s personal card with about a $900 balance and we were definitely making good progress by then.
The last card, my personal card, started out with around an $1,100 balance, but since we only made minimum payments on the card in the months we were paying off the others, by the time we got to this card in our debt snowball list, the balance was under $1,000.00. I was lounging around one Saturday morning, reviewing our finances for our mid-month checkup (that time when the second paycheck comes in and I review what has been paid and what has yet to pay, and we figure out how much cash we’re going to be withdrawing for our envelopes), and I showed our budgeting projection for the second half of the month to my husband, who said, let’s just be done with this. Let’s bite the bullet and pay the whole thing off right now!
Now that’s a hubby that’s on board 🙂
Would our finances be a little tight until the next payday? Yup, but I had already allocated funds for our envelopes which included food and groceries. Since I’ve been completing an Autoimmune Protocol Diet and making most of our meals from scratch, we’ve barely been eating out the past month, and I’ve still (mostly) stayed within our grocery budget. If I’ve gone over budget for the week it’s been by about $20 and that was because I picked up a beef roast or extra pork chops, and we had sufficient cash in the envelope to do so.
So total debt paid off between late October – mid January = $3,500.00.
So where did the extra funds come from to payoff four credit cards in three months? This is mostly all from funds from doing our zero-based budget, and being purposeful and intentional with the excess funds leftover after everything is allocated. It’s only been a few months, but as time has gone on we’ve been able to better complete our monthly budget and know what to expect and project how much money is leftover after the bills and envelopes are allocated. We’ve kept better track of things like autodraft payments, which actually can catch you by surprise if you’re not careful. I have to watch and account for things in our budget like the bi-monthly pest control plan that will sneak up on me if I’m not careful. But once all of that is taken care of, the leftovers is what helps us put large chunks of cash toward our debt, and now that the small ones are all out of the way, it’s time to tackle the big ones.
Our next goal is to payoff my car, which we just purchased a year and a half ago, before we had learned about Dave’s plan. At a 0% interest rate, my entire payment already goes to the principal balance which is AWESOME. Not that financing is OK, I’m a Dave student after all, but it’s so nice to have a loan where I’m not competing with the bank for which dollar goes to them and which goes to MY balance. We will have the car paid off this year. Things like bonuses from work, any tax refund or raise money, will determine if it’s paid off earlier this year or later in the year, but either way we are on track to get this next debt out of our lives in 2016!
I wish you great luck in tackling your debts as well!