Brushes & Budgets

I unfortunately had to reconsidered my title once I found out about the avalanche that occurred in Colorado. My heart is with all of the families and friends of those who were lost.

Coincidentally, I was raised in Denver, CO and I remember witnessing the hockey team the Avalanche win the Stanley cup for the first time when I was 10 years old. I never thought I’d think about the Avalanche frequently, until I realized my finances were in turmoil. Budgeting helps you to stay organized…so does the method you use to pay your debt down. Today, we’ll get to chat about all of the different ways for you to pay debts.

Before I begin talking about the methods, the very first thing I did was write down every single debt I owed by name, minimum monthly payment amount, balance, due date (not including the grace period), and interest rate. I had a small heart attack when I saw that $53,924.35 glaring at me. I felt judged and if you do this you may feel judged as well…but don’t say I didn’t warn you. I needed to see what I did to myself before I could come up with a plan on how to tackle it.

A plan is important because the goal is to focus on paying down one debt at a time, while everything else receives the minimum payment. Trying to pay multiple things off all at once, will make you go legit crazy. It’s also a motivation killer because you won’t see progress, or you won’t see the progress you need to keep up the momentum.

I mentioned before that I initially began my journey using Dave Ramsey’s method to work towards my financial freedom. Dave Ramsey suggests to those who use his method to start with the Debt Snowball. The debt snowball is when you prioritize paying down your debt the lowest balance and pay the minimum payment for everything else. Once you’re done paying off that debt, you take the minimum payment for that account, and you snowball it into the next lowest payment, and snow on and snow forth. When you have snowballed enough, you can make a freaking snowman! Kidding. The reason for this is to see a win sooner rather than later. It’s been allegedly scientifically proven to keep people more motivated, especially when they have a higher amount to pay in the long run.

I used the debt snowball during my first year. Once I became credit card debt free the first time, I immediately flipped to the debt avalanche which is another popular method for paying down debt. The debt avalanche, is when you prioritize paying down your debts according to the highest interest rate and paying the minimum payments for everything else. The good thing about the debt avalanche, is you pay less interest over time. Typically, you pay things off faster because it consumes everything in it’s path…like an avalanche. The downside to the debt avalanche is it could take a while to see your first win if you start with this method first.

Once I was established and began making frequent balance transfers, I had to readjust things all over again. I went from snowball, to avalanche, to paying according to when the introductory period ended to prevent from paying extra interest. The reason I did this is because if a payment didn’t get paid down by the end of the introductory period, it would’ve been my next debt avalanche payment. Ay yi yi. So that makes yet another payment method. I will be turning back to the avalanche during the summer of 2023.

You can also do the exact opposite of the snowball by paying the highest minimum payment. Or like I heard someone say, pay the thing that bugs you the most. Maybe it just seems like a loan you need to get paid down first because you’re so tired of looking at it, but it doesn’t fall in any of the categories I mentioned or will mention. Remember, no matter what…everything else gets paid at the minimum payment.

There’s one more payment method. It’s a payment method based off urgency. It’s something I heard from Leila at debtoverit.com. Some things, no matter how high the balance need to take precedence over everything such as a balance with the IRS. Honestly, if you’re behind on rent or mortgage, your car loan, or your credit card that you use to feed you and your family, focus on that first. Your immediate needs are much more important than anything else. If this is causing you to be behind on everything else give the creditor a call to see if they can offer an extension or another arrangement while you get caught back up.

This journey isn’t always about paying down debt initially…but surviving. Be sure to always show yourself some grace.

Until next time!

Photo Credit: https://www.aarp.org/money/credit-loans-debt/info-2016/pay-down-debt-photo.html#slide1