Debt Snowball: What Paying Off Little Cards Feels Like

Hey all,

In my last personal finance post, I gave a background of sorts and also celebrated finally completing step 1. I mentioned my debt load, but didn’t mention my payoff plans.

This month, with my bonus check, I paid of my buggy Best Buy card. MAYBE I did mention that. But honestly, it didn’t feel that great. Like, I want a congratulations letter from BestBuy, or a little celebratory graphic to show up when I send in the full balance and last payment. Nope. Nobody cares.

I am/was oddly hesitant to keep paying off little credit cards with more of my bonus money. I had thoughts like – but I can’t use those in case of an emergency. I should put the money towards a major card instead. 

And then I remembered: I do have a baby emergency fund. And I’m not support to be using credit cards at all!

My plan originally was to pay off actually three cards this month – but that’s if I was perfect, and it’s been a stressful month and I do spend money when I’m stressed out. So, I have BestBuy paid off – and then I was sitting on the money to pay off the next cards…

It’s like I didn’t want to part with the cash. Then, I was listening to Dave’s radio show, and he said that if we are hesitant to pay off debts it’s because we don’t want to admit that we spent the money.

It’s true. It’s also, at this point I’ve forgotten what I actually bought… or don’t care about it as much…or whatever, so I don’t want to pay for it NOW. But guess what honey, that’s not the way life works! So, I sent another $250 to the next card on the list, which is my TJMaxx card. I believe I can pay that one off still, but I am holding out til further towards the end of the month because I don’t want to run out of money before the month is over.

I also have about $400 in cash in a drawer, which I am saving for the end of the month because, as you know from my other posts, Sky is supposed to be here. I want to save that to know I have financial peace when he is here. I don’t plan on spending all that (or even close to it?) but I don’t want to even slightly worry that I’m going to overdraw, or something like that. (I get paid monthly – so last weekend of the month/last week is generally the most precarious financial time for me).

Just a small update on my financial thoughts before I begin writing my next post – which is about – the love life.

Dave Ramsey’s Baby Step 1: DONE! OR: Personal Finance – The Struggle Is Real

Today I’m going to be adding a new category to the blog – about finances!

I feel that finances are something that is kind of taboo to talk about. I’m not the first one to have that idea. But anyway, one thing that I am finding — being a follower of Dave Ramsey — is that, there are not many examples of single people running the baby steps. It’s all, “we paid of $389,000 in 5 months making $150,000 combined income a year!” (exaggeration). Which is great. But it kind of makes those of sitting there on single incomes, get a bit nervous.

Today, I officially completed baby step 1. Guess how long it took? Six months. Yep. Dave Ramsey recommends that this should be done in a month. Well, when you barely have wiggle room in your money coming in versus money going out, and already work multiple jobs, you really can’t do much more. I don’t have much valuable stuff to sell at this point in my life, if any. I do sell some clothing on eBay.

But Dave – love ya – but quality of life matters to me to some degree. I’m not going to get rid of my dog or my cats. They are family members. I’m not going to never eat out and not have a social life of any kind. If I had a significant other to spend time with, perhaps making dinner and eating myself every night would be acceptable. In fact I kind of know it would. But, as my life is, there’s a quality of life issue, and people need people interaction! It’s like dieting in a way, if you never allowed yourself a cheat meal, or for me – a daily small treat — you will splurge, and perhaps give up on yourself. So, I allow myself two meals out with my girlfriends a month – moderate – $50 total for the month, and I have to budget for pet food (not crap quality cause I can’t do that morally, but not top of the line either), and I can’t put crap food into my system and feel okay about it. But, I started faithfully saving monthly (I get paid monthly).

A little background on why it took so long — Right after I hit over half my $1000  emergency fund the first time, back in Feb of this year, I got in a car accident. So if you include when I first started working on baby step 1, it was after I got my bonus check at the beginning of the year – so I started in Feb. Also in a way of getting myself in a better financial position, I had just traded my lease in for a car that I will one day own. I hit black ice (I’m in New England) and hit a guard rail in the car I had traded, and obviously had to fix it.

I’m sorry, Dave, but since i spend ~2 hours per day in my car, and I don’t have the cash to go buy a $2000 clunker, and was upside down on my old lease by about $2500, that would mean paying $4500 to buy a clunker. Still in debt. So, I traded “down” into something which a lower payment, that I plan to pay off in 3 years, and freed up about $100 per month, let along a slight insurance savings. It’s my one-sided negotiation with Dave–take his suggestions, and meet him somewhere in the middle between where I was.

I had a $1000 dollar deductible so I couldn’t even pay the deductible myself – or cost to fix, which was just about $700, so I didn’t go through insurance. My dad helped me and paid the rest over the amount I could chip in, but I was back to $0 savings. Then I had some medical issues, and here I am finally at the end of July having just built myself back up to the $1000 recommended emergency fund. It’s also the first month I didn’t tap the overdraft at my bank in order to make it to the next paycheck. I get paid monthly, and although I do budget, as Dave Ramsey it says financial decisions are about behavior — and, as I have learned, you can’t necessarily successfully change behaviors overnight. Change isn’t always easy. It’s not always a “never again” moment. Just like dieting, I slipped up here and there, had moments of zero will power where I thought “this is going to take forever anyway, who cares, I just want to (order food) (buy something cute for my condo) (insert thing i don’t need here)”.

Side-note: HALLELUJAH! 7/31/2015 Baby Step 1 Complete!!!

By the way, although Dave came out with his EveryDollar “Free” software (unless you hook it up with your bank account, kind of like Mint) — I am a faithful / borderline obsessive user of YNAB –  or, a software known as You Need A Budget. I use their phone app, and their desktop app. It requires Windows desktop currently but there is rumors and mentions of a web-based version. (Btw, that link right there – gives you a $6 discount and I get $6 if you decide to buy it, but I would recommend it even if you don’t wanna save $6 or use my referral link. It’s the only financial software I have been able to stick with!!)

YNAB is the first time I have successfully run a monthly budget. It took me a few months of not understanding (especially with paying down credit cards using YNAB -) and two “Restarts” of the budget cause I was getting things misaligned — but perseverance and I’m finally there.

If you’re not sure what the baby steps are, or who Dave Ramsey is — Google it. There are a million articles already describing it all, but baby step 1 is save $1000 in an emergency fund. Baby Step 2 is … pay off all debt except the house.

AHEM. I have almost $100K in debt that is not including my condo.

  • $68,900 of that is student loans. YEP!
    • $24,700 from my first undergrad and a little post-bac pre-med, and
    • $54,200 from doing a post-bac pre-med.
  • $15,600 on a car loan
  • $16,500 on credit cards
    • $7500 of which was a breast augmentation surgery
    • $8950 of that was old debt (about $5000 of which I have no clue at this point what it was about) (the other $4500 was multiple store cards – bestbuy, carecredit, tjmaxx, paypal, amazon, and a chase card i used to buy flights to see an ex I broke up with years ago).

So.. I have a long, long road to go before this is all paid off. So, I’m breaking Baby Step 2 into some sub-steps for myself.

Baby Step 2 – List all debts, lowest to highest, and pay them off one by one, throwing as much money as possible at the first one in the list, then snowball that payment into debt 2 ad infinitum. 

  • Baby Step 2-1: Pay off credit cards. Using undebt.it — slated freedom date is December 2016. 17 months!
  • Baby Step 2-2: Pay off car loan. Slated freedom date: August 2017. 24 months!
  • Baby Step 2-3: Pay off student loans. Didn’t include in undebt.it, since one of my student loans will go up in 2017, and income changes etc. Starting to get far out there!

Here’s the other thing. Dave says, don’t save (even for retirement) until you graduate from Baby Step 2. That was freaking scary to give up “free money” and compounding interest and all that stuff. But, cashflow is cashflow, and I couldn’t contribute that much anyway, plus my work vests the match over 6 years (and honestly – how many of us stay at one company for 6 years) — so I stopped contributing.

I will, however, re-join (whatever company I’m working for) once I finish Baby Step 2-1. Dave estimates most people should be out of baby step 2 in 18-24 months. Well, not even close if we include student loans – it’s about 8 years estimated if nothing at all changed from today — haha hopefully I beat the 8 year mark 😐

Anywho, so yeah my situation is a little eye-brow raising. But I want to put it out there on Internet World so that, if someone close to my situation or worse (or better but feeling worse) can see that you are not alone. We can do this!

I just got paid on my bonus for the first half of this year, and I should be able to knock out three smaller credit cards with that, as well as pay this year’s timeshare fee.

Yep, in the middle of all this, I got a timeshare with my mom. She paid the “down payment” and we are splitting payments. I was depressed… lol. Hey, it is what it is.

Special thanks to Dave Ramsey — I listen to his radio show pretty often (on iTunes, not live) for all the free advice, and the makers of YNAB. Together, those two things are changing my financial life. Rather, the change comes from me, but they’re like my right- and left-hand in this!