I’m pretty excited because soon we’re finally going to be making headway on our snowball! For those of you familiar with Dave Ramsey, you know exactly what I’m talking about.
For everyone else, it’s the idea that after you finish baby step #1 and get your emergency fund set you can move on to paying down your debt. The snowball theory focuses your efforts on the smallest debts first. You’ll pay the minimum payments on everything but your smallest debt. There you’ll pay as much as you can towards the principal.
Once that debt is paid you roll the money + the minimum payment you were making before into your next smallest debt. The idea being you’ll stay motivated with the small victories and not lose focus along the way.
Sounds simple. And is…but getting to that point has been a struggle for us. Mostly because we keep getting stalled at Baby Step #1. But with Dustin starting his new job, and FINALLY getting his first paycheck we’re ready to finally start making progress on Baby Step #2.
Now there are a lot of ways to stay organized with your debt snowball, but I am a fan of the spreadsheet. It’s a fantastic motivating tool! You’ll be able to see exactly what an additional $50 payment now will do for your finish line. This will definitely help incentivize you to find additional payments in your budget.
There are plenty of apps and programs out there you can buy that will take your information and update it automatically. But I enjoy the process of inputting everything into a Google spreadsheet and watching the numbers change.
Plus, it’s free.
And I’m so nice that I’m willing to give you all the equations and information you need to build your own! Now the equations aren’t perfect but you’ll get a fairly accurate idea of where you’re at with your debt free journey.
Down the first column put the current balance of your accounts. I also put in my recurring bills for budgeting purposes, but you don’t actually need to add those. The next column will be your payments. Put your debts in balance order, so all of the payments will be minimum payments except the first one.
Alternate the balance and payment columns. I usually do six months and then bring it down so that it can all be seen by scrolling down. But otherwise, you can just keep going to the right until you reach your Debt Free Day!
As you can see above in the screenshot of my debt snowball it adds up FAST!! You’ll see the payments all total out to the same amount each month which makes figuring out your payments easy. Roll down the payments after each balance hits zero. If you get a bonus from work, a tax refund, birthday money, etc can be added to your snowball too.
So now for the technical stuff. The equations.
Like I said, it isn’t perfect. But for planning and motivational purposes, it’s pretty fantastic.
So this week we both got paid!! It was a very exciting week because it’s been a long time since Dustin’s last paycheck. It felt good to finally get an idea of what he was going to be making. This paycheck was a little less than I’d been anticipating but it was sure as heck nice to be a dual income family again.
This week I paid all of the bills that are due before our next payday. Since that includes our mortgage it’s the biggest bulk of money going out. That means next payday we’ll be able to actually start working on our snowball.
You’ll also notice our mortgage went up….sigh. Insurance and taxes went up so our escrow payment went up a little bit. I won’t complain too much though because the increase was due to the value of our house going up. And since we’ll be selling soon that’s very good news.