It's challenging to get out of debt without a strategy! In this audio snippet episode, Karla and Demetrius share the method they used to pay off over $125k in debt - The Debt Snowball Method.
Publish Date: Nov 05, 2020
today's episode again is about the debt snowball method. So we're gonna jump right into this thing s so one thing that you need to understand is before you can begin the debt snowball, you have to write a budget. So if you haven't written a budget, if you haven't listened to our previous episode, it's a money plan. It's a money playing the money playing. If you haven't checked it out, go check that out. Get your budget done because none of this works without first having a budget. How you gonna pay off that? You don't even know how much money you got coming in and you don't even know how much money you got going out. You know, you keep putting that. I've got five on it every month. That's about all is to spray and pray strategy. I'm just gonna throw some stuff out there. Hope that you know something happens and I can't. That will be my praise report. See, because I'm setting up for the praise report because I don't know how it happened. That's how I don't know how it happened. I'm not interested in those kinds of miracles, not miracles that are because I'm just chaotic. And somehow it worked out. Maybe it wasn't even a miracle. Like, maybe you could have did this, like, two years ago. Had you not been afraid to write down how much comes in, right? Like not the big number that they say is your salary. But what do you actually take home? And then what do you actually spend? I mean, actually, not just how much is my rent or mortgage and car note, but like, actually, how many times have I been Starbucks this week? Yep. And how many people are charging you for random stuff that you don't even use anymore? Right? Like gym memberships and stuff like that. I got multiple gym memberships like one is a gym by the job that I haven't worked in a year, and it's only 10 bucks a month, but I've been paying them 10 bucks a month for years. I don't think they're working on your muscles with you. And they hit me with, like, a $50 annual fees. So I'll tell you 170 bucks just because I haven't had the energy to write a letter to cancel this thing. So That's what budgeting does. It makes you go back to your bank account because your bank account will tell the truth on you. And look at who you paid what you spent back in January. We realized no, this was December. We stopped to do a budget for 2019. And we figured out that we have spent 1100 bucks on food. Embarrassing in December. Embarrassing. Embarrassing. But we needed to know it so that we could course correct. Absolutely. The first things first. Set up your dog on budget. Set up your budget like somebody. Daddy. That's what I'm in daddy mode today. This is a three day weekend way. Have had our child very happy for school to start happy. Do the stars. I'm in Daddy mode e put all y'all a bit If if y'all don't listen carefully, please Listen. All y'all putting your PJs on and going to be Oh, so cool. So, yes, we're writing our money playing. We're writing our budget and then what you have to do when you're honest about how much is coming in and out. Ah, part of what that is is your list of debts and this is another one where it might not be comfortable, especially if this is the first time you're doing it as a couple asses. We have told people many times this might be one of the least sexiest conversations that you have. Um, but it is the very riel conversation about how much actual debt and what the number is. So not that I have a car note, but how much do I owe on that car? Note? Not that I have student loans, but how much do I owe on that student loan? I mean, we had to start writing down all kinds of things, and that's where you know, skeletons and and all kinds of random stuff started coming out of closet, especially as related to credit card debts, credit cards that I didn't even know folks had. Those kinds of things had to deal with all of that. But part of it was writing it down, like putting it on a list, how much it is, how much you owe and how much is the monthly payment on it if it has a monthly payment. Like I said, we literally had to put down. We had a car. We had multiple credit cards. We owed family money. We owned. We had student loans. We had old debt from, like, previous businesses that we had shut down that we had to go through. We even had old cable bills because, you know, when you move and you're not using direct TV anymore, you got Comcast now. So, you know, direct TV can wait a little bit on the money like we decided. No, we actually need to make sure we pay back directive and everybody else that we had little small bills with. Because if you're gonna be debt free, we were like, we got to do it completely. And sometimes you'll be salty with certain companies and you just like I'm just not paying them just on G. It is only $82.90 but I'm not paying you because I don't appreciate how you came at me when you when you call my cell phone while I was at work. Everybody, you come up with all kinds of reasons why, you know, they told me it was gonna be from 8 a.m. to 12 p.m. The time window. And they didn't come until 2. 30. I'm not playing them. They owe me for my to my two hours. You could come up with all kinds of reasons, but we decided no to do this. We actually have to be completely debt free. Which means we way. Oh, no one anything. So, um so, yeah, So we had end up writing down all of our debts. Definitely. After you got that budget, it's really getting clear on what is your list of debt. So then after that, you start to say, Okay, so what do I do with all of this? Right? And you probably have heard of this if you have been, you know, working on your finances for a while, you might not have if this is fairly new to you. But there is a method that's called the debt snowball method. And it is approached Thio paying down debt that we found to be a game changer for us. And, um and there's a couple of different ways you can approach it. Um, one is where you take all of that debt and you put it in order from the smallest debt, like the number. So call it. It is that $82 directive bill all the way up to the biggest number, which might be your tens of or plus thousands of dollars on a car on student loans. And you put them in order from smallest toe largest. Another approach you can do. What you might have also heard of is you put them in order based on which one has the highest interest on it on there's a couple of different reasons why, why you could go the two different ways. One you will hear because some debt has a high interest. With each month that you don't pay on it, you are amassing mawr interest fees, right? And so there is this value of ensuring that if you have a ton of interest that you're not, or you have a very high interest loan that you're not paying a ton of interest on that loan. But when you look at small debt first, which was ultimately the way that we went, we found that being able to knock things off the list quickly was a huge motivator for us. Like just think about it as it relates to even you know, anything that you might have a large amount to tackle. Call it Wait or I don't know, studying for things like, if there are elements that you can knock off the list quickly, it can make you feel like you're moving ahead faster. And that type of motivation, um, can continue to keep you on a path when sometimes you could get derailed easily if it just feels like this is going on forever and ever and ever with no end.