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The Debt SnowballOnce you’ve got your $1000 emergency fund in place, it will be time to start the Debt Snowball plan to get rid of debt, once and for all! Getting out of debt is essential for truly gaining financial freedom and security. It’s hard for some of us to imagine living without debt, because it’s always been our way of life. We have to change our mind-set to understand that (1) we can live without debt and (2) it’s important to live without debt. 
The debt snowball plan will show you how to get rid of the debt you already have. Staying out of debt will be the area where you will really have to change your thinking. You’ll actually have to save up for things you want or need, rather than just financing it or putting it on the credit card. Our society is all about instant gratification. We want something, so we go get it. That type of thinking will only put you into a state of impending financial doom. We’ve got to learn to be patient and wait until we can afford something before we buy it. That doesn’t mean wait until we can afford the payments. It means wait until you have the cash on hand to purchase it! Yes…you might have to drive that car a little longer than you want to. The furniture might not be the style you prefer. You might not be able to do that kitchen remodel right away. But when you think about the difference between having a million dollars in the bank when you retire, and having a million dollars in debt when you retire…aren’t the small sacrifices now worth it? We’re not saying that you can never have those things you want again. We’re just saying that you need to learn to wait. Save the money you will need, and then buy it. Once you get rid of the debt you now have, you’ll have the money you need to save every month for those purchases. Think about it. If you don’t have a car payment, couldn’t you save that amount every month until you have enough to pay cash for a good used car? (By the way, please don’t buy a brand new car unless you want to throw away a few thousand dollars when you drive it off the lot.) Okay…we keep talking about this debt snowball. So how does it work?It’s actually pretty simple. Get a piece of paper and write down your debts-smallest to largest. This is the order you will pay them off. Don’t worry about interest rates. You want to see results fast, in order to have motivation to continue. To pay off your smallest debt, use the same methods you used to fund your emergency fund -sell stuff, find extra means of income, cut back on expenses. While you’re working on paying off this first one, just pay the minimum payments on everything else. When the smallest one is paid off, take the amount of money that you have been paying on it, and add it to the minimum payment for the next debt in line. When that one is paid off, take the amount you’ve been paying on it each month, and pay it towards the next one. And so on. So you’re not decreasing the amount you are paying towards debt each month as you pay debts off. You’re actually paying the same amount towards debt every month. You’re just throwing it at a different debt as you pay debts off. Any time extra money comes in-income tax returns, bonuses, etc.-pay that towards your debt snowball to make yourself debt-free even sooner! Living without debt is not the most popular thing to do. And getting there won’t be easy. But once you’ve paid off that last debtor, you will be well on your way to financial security! Don’t let anyone discourage you or get you off track. You know that what you’re doing is for the well-being of your family. It doesn’t matter what others think. You must do what is best for your family-and living debt-free is definitely best! Good Luck! Family Budget|
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