Monday, January 6, 2014

Debt Free - Like Really

I have been really serious about becoming debt free....  For like the last 20 years.  

Made you laugh.  Right?

But seriously.   Now that I have a daughter I so have to get my act together.   I lose sleep thinking that  she may have to go without as she grows up.    I remember how my Mom "struggled" make ends meet.  I would like Missy Miu to see me "budget" to make ends meet.

In order to become debt free I have to have a plan. So I have decided on the following  route.

1. SNOWBALLING - From most to least expensive interest rate I am listing my consumer debt with the amount of months left.  Here's an example...  err...  Not mine:

1.  Furniture Store       32   %       6000     84
2.  Dept.  Store Card   28.8%       600        22
3.  Dept.  Store Card   28.8%     1100        48
4.  Car Loan                   9   %    25000     600
5.  Family                        0  %      2800         0

This list allows one to list their most expensive debt (using the interest rate).  Pay the minimum payment required on bills 2, 3 etc.  On the first bill you throw more than the minimum amount.  Every time you move down the list you snowball.   The payment used to pay off the most expensive debt will be applied to the next most expensive debt on the list.

2.  Start Now  Procrastination is not helping to pay down my debt.   How is it working for you?

3.  Make a Budget and get it to balance.

4.  Trim Down Where can you cut spending.   Does it mean bringing your lunch 3 days of the week instead of buying for 5 days?  Maybe that's an extra $65  month.   Take the $65 and apply it to the first loan on the top of the list.

5.  Make A Payment No need to wait for the due date.   If money is owing...  It's always owing.   Each time you apply a payment, you reduce the interest added on.

6.  Empty The Pockets
Got change in your pocket? Under the couch  cushions? I collect loose coin in a jar and stash it way in the back of my closet.   Every couple of months I count up the money and apply it to debt.  You'll be surprised to see how much money this can add up to.

Next week we will discuss making a budget.   In the meantime I ask that with me you create your snowball list and make a payment.

Until next week Financial Mamas!

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