I have to confess that I have been eyeing this debt snowball thing with much trepidation. I am very familiar with the many ways debt can snowball, and I was not excited to see I had finally arrived at Debt Snowball Day.
However, Mr. Bryan is full of surprises. Debt Snowball Day is not about the ways debt can build into a snowball, it's about the ways you can eliminate your debt--snowball style.
I have long been a student of Suze Orman. Suze says, when eliminating debt you should pay the minimum payment plus $10 on every bill, and throw all the money you can at the bill that has highest interest rate. Intellectually, this approach makes perfect sense to me. Unfortunately, my biggest interest rate bills also have the biggest balances. It was discouraging to follow this format and never feel like I was getting ahead. Not feeling like I was getting ahead, I abandoned the plan. I lost focus and started paying bills over here, then bills over there. Still no progress.
Bryan's approach is so much more logical to me. Here's the plan:
1. Make a list of all your bills, list them lowest balance to highest.
2. Make the minimum payment on all your bills except the one with the lowest balance.
3. Throw as much money as you can at the bill with the lowest balance.
The result? Wa-la! That low balance bill is paid off and you get a quick win! Yeah!
Now, take the money you were putting on that bill, and apply it to the new lowest balance bill + the minimum payment you were making on the bill you just paid off. THAT...is the SNOWBALL! Before you know it...debt be gone!
Bryan suggests that you make a game out building your debt snowball. How much money can you apply to your bill of choice each month? Can you pack your lunch and apply that money to your snowball? How about turning down the heat a bit, making your coffee at home, or renting some videos instead of going to the movies?
This lesson comes with a web link to a debt calculator that lets you see, based on your payment schedule, how quickly you can be debt free. Can you beat the calculator?
Day 20...Should you consolidate your debt?
I finally sat down to pay my bills. I should have done this about 5 days ago. However, my only late fee appears to be a few dollars on the water bill. With my travel schedule, work schedule, and the holidays, my need for minutes far exceeded my access to minutes. Add being sick as a result of burning the candle at both ends as well, and let's just say I am happy to pay the late charge on the water bill.
I am getting the hang of the paycheck allocation spreadsheets. I am not quite completely proactive at assigning money to bills, but I am mastering the backend of things and allotting money appropriately for my bills. It's only my second month at this, so I am pleased with my progress.
I went to the site Bryan suggested on Day 19 and plugged in my debts. It took a little fiddling with the numbers, but I got the hang of the chart and was able to play with different scenarios. If you recall, Bryan suggests paying off your smallest bill first so you get that feeling of a win. I am modifying this approach just a bit, as I have that stupid IRS bill hanging over my head. It has a very high monthly payment, and well, I find it to be a little nerve-wracking. While it is 3rd from the bottom on my list of balances, I have a fire in my belly to get the darn thing off the books. By following Bryan's formula of putting minimum payments on everything else but the bill I am working on, I was able to put an extra $200 on this bill, even with the last of my Christmas shopping. I am beyond excited! I have promised my girls dinner at Olive Garden when this bill is finished and I do love my tiramisu!
Now for Day 20!
Today's Balance UP! is all about debt consolidation. Through his counseling, Bryan has encountered clients who want to take their debt and use a mortgage based loan to just pay it off. Initially this sounds good. You trade in your interest, Bryan uses an example of $18,000 in debt with an interest amount of $1,935, and you dump this debt into a mortgage loan where you can deduct the interest from your taxes. Sounds like a great financial win.
It's not. If you consolidate that debt into a 30 year mortgage you will end up paying $11,716 interest. Yep. You just swapped about $2000 of interest for nearly $12,000. Why? Because a principal you were going to pay off in 2 years, you are now paying off in 30, and if you add anything to it such as a car, a new TV, home repairs, new appliances, etc., the number just gets bigger. Certainly something to think twice about! Balance UP! and you won't have to even consider consolidation! You can do it!
Day 21--Balancing your life--halfway there!
I am now halfway through the Balance UP! program and I have learned a lot!! I am certainly looking forward to the second half of my lessons!
Today is all about balance and goal setting. Bryan's worksheets are, as usual, very helpful. Did you know that only 3% of us even bother to set goals? That means 97% of us are drifting around, hanging out, working our tails off, or whatever we're doing, and we have no particular plan in mind. That certainly explains a lot now doesn't it?
I have goals all over my walls, but I have to say I still have been a little scattered. Bryan points out that if you work on your goals each week, and improve just 1%, in a year's time you will have improved 70.12%! (Thanks to the benefits of compound improvement.) Now who does not want to be 70% down the road to reaching their goals by the end of 2012. I KNOW I DO!
Bryan breaks down the 6 areas of a Balanced Life for you:
3. Health & Life
All you have to do is follow the worksheets and give some thought to what you'd like to achieve in each area. Once you have that down, you need to ask yourself the million dollar question:
What is distracting you from your goals?
The answers to this question may be a little painful, but you can't get to your goals until find those answers. Once you do find the answers, you may want to change your goals. For example, you think you want to be a world champion sky diver, but the thing that is in your way is that you are busy being a parent. You may need to reroute your career goals so they support your parenting versus conflicting with it. In other words,
Sometimes you need to say "NO".
It was this very process that led me to pull back from some of my own pursuits. I haven't been to belly dancing class in a few years, because I can't fit it in with my kids' schedules and needs right now. I want to publish my book so I am not even considering dating. You know what? I don't mind any of this because I know what my goals are, and I really like the goals I have chosen. Once these goals are reached, I will write some new ones.
What are your goals? Find out when you Balance UP!
Day 22--Balancing Part 2
Today Bryan takes us through the second half of our goal assessment, and he asks some pretty tough questions.
Bryan starts with "How do you feel each morning?" For so many of us, how we feel in the morning isn't even something we want to think about!
I remember when I was working a lot of hours, getting kids to and frow, and in grad school. I was so exhausted my stomach hurt. Being nearly unable to move I reached for the coffee, which made me feel like a bomb had exploded in my stomach, but got me moving. I am very grateful that was a short period of time in my life, and for a good cause. For too many of us, it is the norm.
Bryan goes on to ask if we are eating correctly, exercising, taking vitamins as needed, and are we resting???
Is my lack of energy keeping me from the life I want to live?
Ouch! While I know a lot of people who would say they can't possibly make time to be healthy, I know everyone of them would stop dead (no pun intended) in their tracks if asked the above question. We tend to disassociate our crazy lives from the idea that by living them, we are missing our primary purpose, and our pleasure.
Bryan presses on. Are our relationships getting in the way of having balance in our lives, and/or do we have relationships that are getting in the way of our families? Are we in the career that satisfies our calling? Are we maximizing our income? Can we retire when it's time?
These are all incredibly important questions. They say cemetaries are filled with ignored dreams. What are your dreams, and are you living in a way that allows you fulfill them? (I have a more information on this topic for those on my mailing list...so if you aren't there yet, sign up!)
Your money should be used to support you as you move down the path toward your dreams. It should not be the primary cause of your stress and the very reason you CAN'T fulfill your dreams.
If you haven't signed up yet, what's holding you back? Balance UP! is clearly the simplest most straightforward method to getting your money and life together in a way that moves your money to a position of support for your life. I am great at squeezing the life out of a dollar, but where I was putting the juice from that dollar wasn't giving me full benefit. I am excited to be learning a new approach.
Remember...share your money saving tips and enter the drawing for you and a friend to win Balance UP! for free. Enter here!
Day 23--Prioritizing your goals
Today's video was less than 2 minutes long, but the instructions will change your life!
Bryan supplies a Goal Brainstorming Worksheet. You complete the worksheet by goal topic area and list what you would like to achieve in each area. Sometimes people get hung up on defining their goals because life is messy and things happen. That's OK. These are your goals today.
For example: Say you have the spiritual goal of attending church or temple each week. Things are trucking along just fine and then your appendix bursts (I hope this doesn't happen to you!) and you aren't going to be leaving the house for a while. Do you get an F in this goal? Of course not! You can table it until you are able to work on it again, or you can change it to watching a service on TV. These are your goals. You don't have to share them, and you don't get a grade. You just need to get started.
Once you have your goals established, prioritize them by category. Take your time and think about what you want to achieve in your life. We know that what we focus on, grows in our life. So if you write "I will be out of debt", what are you focusing on? Debt! Bryan suggests something like, "I will pay an extra $430 on my bills each month." The focus here is on having an extra $430 each month. Maybe you can make that $430 grow to an even bigger amount!
Have fun with this part. By setting goals, you are defining what you want to do to make your life better!
Day 24...Finalizing that prioritizing
Ok. So we have our goals down from our brainstorming session and we have taken the time to really think about what we'd like to achieve in all the areas of our life.
Today we are going to look at our list again, and we're going to whittle it down so that we are only working on the 10 or so goals we really want to get started on. We are whittling because our little heads can't wrap around a large stack of goals. We have to do a few, accomplish, celebrate, and repeat.
If you are working through Balance UP! as a couple, this is where the two of you finally come together. You will pool your goals and whittle them down together so that you know your goals aren't in conflict with each other, and ideally the two of you are headed in the same direction.
Bryan reminds us to make sure our goals are SMART.
SMART goals help us to assure the greatest opportunities for success.Next, we go back to the Paycheck Distribution Tool...and let me say this is my very favorite thing about the entire Balance UP! program so far. It is so easy to play with where my money goes each month when I use this tool. I can play around with the scenarios until I land right where I want to be for each month.
Using this tool you can easily set aside funds for a vacation, Christmas, a new stove (that's on my list), etc. Then...handy dandy Form 7 tracks each month's set aside amount. Wa-la! How nice to see a Christmas, vacation, or stove fund growing each month!