Snowball Effect.

So if anyone has ever tried to follow the Dave Ramsey steps for getting out of debt, you know that one of the first things to do is make a list of what you owe and break it down by smallest amount to largest. Ramsey also suggests leaving your mortgage as last on your list. This is a good idea because if you tried to pay that off first, you would drive yourself insane!

 

Debts to Pay	June 9, 2016
Doctor Bill A	111.97
Doctor Bill B	204.82
Doctor Bill C	331.20
Doctor Bill D	2,422.48
Student Loan 1	2,763.18
Student Loan 2	2,785.52
Student Loan 3	2,998.40
Student Loan 4	3,517.61
Student Loan 5	4,495.04
Student Loan 6	7,861.52
Student Loan 7	8,157.74
Student Loan 8	8,320.70
Car Loan	13,385.99
Mortgage	52,189.46
Total	109,545.63

Here is what we owe currently. It is ridiculous! Now keep in mind, we are not very old—mid-20s actually. These debts were all racked up in the last 7 years. Just like the debts can snowball upward, they can also snowball downward. This means that by paying off the smaller amounts first, we will gain momentum to be able to pay off the larger ones. For instance, on my list, Doctor Bill C is a monthly bill of $56. I can either choose to continue paying it out over the next 6 months, or I can make extra payments to knock it out sooner. Instead of $56, I round up to $60. By doing this, we give ourselves an extra $60 a month for the next debt. Makes sense, right? We write it into our budget to pay a little extra each month, so that we can pay things off quicker. This may not be an option for everyone, and for us, it isn’t always either (more on this later). But when we can, we pay more.

Baby steps is what this is all about. I’m not some financial wizard. I do have basic accounting skills (thanks mom & dad), but I’m definitely no expert. However, I know that I want my family to live free financially. I would like to be able to save more and pay less. You don’t learn to run before you learn to crawl. It’s the same with finances. By making little changes here and there, you can learn to make big changes in the future.


--chloe.