Debt Snowball

So we are working our debt snowball. We've been seriously working on it since December. For the uninitiated, the debt snowball is step 2 of Dave Ramsey's* debt reduction program. There are books and classes and other stuff, but the basic premise of the program is free and you can get all the info at the website. There is also a Rav Group and I'm sure a lot of online resources. He has a radio show and a TV show, but I don't think he's that great on TV. (Sorry Dave).

Anyway, in the last two years, we have paid off our car, our golf cart and two or three credit cards. But in December we really got serious and put together a budget. We use cash only to pay for all of our day to day expenses. I used to think that ATM cards were so great because you had a record of everything you spent and where and when you spent it. But I have found since switching to cash that it is much harder to part with! I spend way less money than I did with the card. I have a certain amount of money to spend in the month and when I go in my wallet to get that $5 for a starbucks, and see that I only have $100 left for the month and it's only the 5th, it's pretty easy to say no to that coffee.

I have discovered an added benefit to this program though. It's called peace-of-mind. In February our car went in for an alternator. It cost $550. I have never been so happy to spend that amount of money. Why was I happy? Because I actually had it in the bank. I've learned that spending money isn't stressful. I've learned that cars that break down do not cause stress. Financial instability is the culprit and it takes a fairly small amount of money to give one that stability. The first step in the program is to save up $1000 and put it in an account for emergencies. As long as it may take you to do this, it is the most liberating part of the whole debt reduction experience. What it means is that when those little emergencies come up, you don't end up completely financially devastated. It means that you don't have to charge it, or borrow it or steal it.

In addition to having this money for emergencies, you also have it to give you financial confidence. I had a little run in with a credit card company Saturday when I realized they had jacked up my introductory rate up to 29.99% for a really stupid reason. When I called them to "chat" about it, I found that I was able to negotiate with them for what I wanted, because I was willing to close the account and pay it off that day if I didn't get what I wanted. In reality, it would have depleted my emergency fund, but I was willing to do it, and because I could, I was able to be very persuasive.

I know, it sounds like I drank the kool-aid and maybe I have. But I like it. It's good for me and it would be good for you too. If you think you don't make enough money, you're wrong. If you think you have too much debt to pay it off, you're wrong. If you want some motivation, you can find success stories at the website. Or you can listen to the Friday podcast where people call in to say they are debt free. It is pretty inspiring.

*Disclaimer: The radio program, the books and the classes are peppered with a fair amount of Christian preaching. If you don't like that sort of thing, you can do as I do and just ignore it. I don't subscribe to the religious stuff in this program. But you can do the program without a church, and without god if that is your inclination, like me!