A little while back I posted about how we had taken Dave Ramsey’s Financial Peace University class and were working to get out of debt. Well, on March 10, 2017, two years after we started the class, we paid off the remainder of our debt. It wasn’t easy! But we did it. Almost every bit of extra cash we had flowing in (bonuses, raises, tax returns, etc.) went toward our loans.
|This right here was THE best feeling!|
Before I talk about the debt snowball, I’m going to talk a little about our budget. The class gives you access to all of the materials you need to budget and plan your finances. I took the time to make a budget book for us to refer to each week. Some people prefer an app (like the Every Dollar app) or an Excel spreadsheet, but I like things on paper. I printed out a years worth of the “Monthly Cash Flow Plan” which is the budgeting tool that Dave suggests using. The notebook also included monthly tabs with a calendar spread and a “cash flow plan” for each week, our Debt Snowball form, our expense schedule (what date things were scheduled to come out each month – almost all of our bills are automatic withdrawal.), and our short term and long term goals. (Remember, I’m an organization freak, so this works out perfect for us.)
We tried budgeting by month, but for us it is waaaay easier to look at our finances on a weekly basis. We get paid on opposite weeks so this works out great for us. If you have paychecks coming in every 2 weeks, then you could budget every 2 weeks (we are going to start doing every 2 weeks since I’m not working as much now.)
Each week we sat down and filled out our budget. This would include only what was coming out that week. We set a budget for groceries and restaurants and used the “envelope system” for those. We would try to only use cash for these things but sometimes we would end up having to use the card (we’ve gotten really bad about this lately – #confessions). We would add in extra expenses for that week such as diapers, hair appointment, etc. If we were ever spending more than we had coming in, we would try to cut back somewhere. If our income was greater than our expenses that week, we would apply this toward our debt. Budgeting weekly made it very easy to keep a close eye on what was coming in, what was going out, and how much extra we were able to pay toward debt.
*Something else to note – the goal for your budget is for every dollar to be accounted for. When you subtract your expenses from your income the total should be zero. However, we would typically leave a small buffer just in case something unexpected came up.
Now, on to the debt snowball –
We decided to start with the least amount owed and tackle it from there. Here’s what our debt snowball form looked like. We still had payments on both of our cars and my student loan. A total of $33,458.53 before interest!
We had a small personal loan that we had just finished paying off so we took the money that we had been paying toward that ($200/month) and applied it to my car payment of $250/month which totaled $450/month.