Paying off Debt using Debt Snowball Method

[sherker55]

That's a good theory, but what are the chances that if you built up all this debt, that you're not going to continuously accrue new debt while you're paying off the old ones?

easy...YOU DONT DO IT...we haven't used our credit cards, or aquired any more debit for a year (since we took the class)...theory works, thousands of people have done it.

[sherker55]

5000 for student loans? Boy I wish!

I can relate. I am almost maxed on mine for life......

that's why you start small and pay off the smalll debts first to get them out of the way (and don't build back up) then you throw everything you can come up with every month to pay down the bigger ones.  the course I took, they recommended selling everything you can that you don't use on a regular basis, and also applying that money to your loans as well.  also, cutting out all the little purchases through out the week, like convienient stores...packing lunch instead of going out, etc.

I think the point being that if you stop spending, you can finish paying off what you have.

A lot of this seems like common sense to me but, it's impractical for most people. Packing a lunch and not stopping at a store is impractical for most of us. I wish I had the time to pack a lunch! Of course it would save me some money but, it's just not realistic.

Mike, they make these things called refridgerators...they keep food from going bad...you can pack your lunch ahead of time, and put it in there!

[Mike]

Not possible in my environment. I change places to often. I have offices in two different buildings in MA, and travel to CT a lot also. It's easier for me to just grab something on the run. I'm not saying I got out and spend $20 or $30 on lunch but, it's probably about $5 a day. There’s a point where depending on peoples jobs things just aren't practical. We could save money by walking to work to but, I don't see a lot of people doing that. It’s my opinion that the best spending to cut out is the useless stuff. Instead of going home and drinking a beer or two or six every night have a glass of lemonade. On of the biggest things that I’ve noticed and changed is that I will only order a glass of water when I eat out. Restaurants generally charge more than the cost of a bottle of soda for a soft drink!

[ikethegreat]

Restaurants generally charge more than the cost of a bottle of soda for a soft drink!

That's why I always get 3-4 refills!

[sherker55]

Not possible in my environment. I change places to often. I have offices in two different buildings in MA, and travel to CT a lot also. It's easier for me to just grab something on the run. I'm not saying I got out and spend $20 or $30 on lunch but, it's probably about $5 a day. There’s a point where depending on peoples jobs things just aren't practical. We could save money by walking to work to but, I don't see a lot of people doing that. It’s my opinion that the best spending to cut out is the useless stuff. Instead of going home and drinking a beer or two or six every night have a glass of lemonade. On of the biggest things that I’ve noticed and changed is that I will only order a glass of water when I eat out. Restaurants generally charge more than the cost of a bottle of soda for a soft drink!

I agree, and cutting out the litttle BS purchases is one of the best things you can do...I have limited drinking to special occasions...alcohol is not cheap.

[DV8mAn]

The Dave Ramsey stuff works.  I enjoy fiscal responsibility (due in large part to my wife) and we use a modified D.R. type system.  Stick to budget, dont spend what you dont have, pay cash for purchases (excluding home), etc.  Only time I finance a car is when the money works harder in the bank, i.e. savings interest rate is greater than loan interest rate.  Seemingly basic stuff, but harder to implement than you think.  I do think it's important to use a credit card assuming you have self control.  You are protected from fraud to a greater degree.  If you have fraudulent purchases on your debit card it will eventually get resolved, but you are out the cash until then.

[slipkord]

Just take out your 401k from previous jobs and payoff debt that way...Worked for me.

[sherker55]

I do think it's important to use a credit card assuming you have self control.  You are protected from fraud to a greater degree.  If you have fraudulent purchases on your debit card it will eventually get resolved, but you are out the cash until then.

Unless you use the credit option at checkout, I do that all the time.

Just take out your 401k from previous jobs and payoff debt that way...Worked for me.

Yeah, if you're a dumb shit...bye bye retirement, doh!

[Mike]

I disagree with you on 401k mark. I've actually made alot of money by taking loans against mine and investing the money on my own. I took a large loan as the economy started to take a shit then invested it. The loan gets paid back with interest to myself. Because of the bad economy the interest is greater than the rate of the return so I ended up making money on both sides. You just need to be smart with it, and not take any loans against it after your 35 - 40.

[sherker55]

I disagree with you on 401k mark. I've actually made alot of money by taking loans against mine and investing the money on my own. I took a large loan as the economy started to take a shit then invested it. The loan gets paid back with interest to myself. Because of the bad economy the interest is greater than the rate of the return so I ended up making money on both sides. You just need to be smart with it, and not take any loans against it after your 35 - 40.

different situation though mike, he is talking about taking it out and using it to pay off debt, not reallocating it for better investments...

[Mike]

Yeah and No. In a down economy if your 401k is turning a loss for investment using it to pay off high interest debt is actually not bad. At least that way your not losing money on both sides. Of course the right thing to do would be to increase the amount of money in the 401k at your current job to replace what you've taken out of the other one.

[MTsixspeed]

I like this idea. You obviously need a budget in the first place. Then you can determine how much "extra" you have per month to put on the lowest debt and get started.

[sherker55]

I like this idea. You obviously need a budget in the first place. Then you can determine how much "extra" you have per month to put on the lowest debt and get started.

Dude, we loosely follow it, and have done very well.  we need to get strict again though because my wife is a teacher and has no money coming in during the summer time.  although, this method has allowed us to set aside money from her paychecks throughout the year, and put it into "summer fund" which will allow us to pay the bills through the summer with no problems.

[konatriathlon]

Good info Mark.  My wife and I are also doing D.R.'s Debt Snowball after reading "Total Money Makeover".  We started in January 2009, and by December we were down to my Accord, two small student loans, and one large credit card.

Due to the birth of our second child, and an unexpected NICU stay, we had to take a break from the Debt Snowball and focus on medical bills.  As soon as we have stopped hemoraging money, we will start up again and I would like to be debt free (except the house) by December 2010.

[konatriathlon]

But I must add...  Because we had SAVINGS, we did not have to use credit cards to pay for medical bills.  We have paid cash for every bill we have received thus far, and we still have a financial reserve.

I'm soooooo glad we started this program last year, because, if we had not, the birth of our son would have destroyed us financially.