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Dear Smart Money People,

Hello, my very favorite people. First I want to say I am sorry and I’ve missed you. I have been away from writing for a while. I was laid off and had to prioritize getting momma a new job.

Recently I signed an offer from a super company that I am really excited to be joining!!

Now I can focus back on you all.

So to get back on the horse, I was reading through some comments that I had received on

I have been asked a few times to go deeper into paying off credit card debt. I originally wrote about it HERE, and in reviewing that post, I think I can offer some additional wisdom.

Let me say first and foremost, I am such a huge fan of yours and want you to WIN, therefore I will share my approach to paying off debt. However, here are some awesome people in this space that I adore and were instrumental in helping me learn and grow my personal finance skillset.

(Note: personal finance IS a skillset. You have to learn it like riding a bike, geometry, all the capitals of all the states. Then you have to practice. I say this in case you are hard on yourself for “not knowing.” We’ve got this. Keep reading)

Here are my fav peeps ~

Dave Ramsey: podcast HERE, website HERE, Total Money Makeover Book HERE

Ramit Sethi: just want to say I love this guy, he is HILARIOUS: Blog HERE, I will teach you to be rich book HERE. Podcast HERE

Jessie Mecham: You Need a Budget Blog HERE, YNAB Podcast HERE

Let’s dig deeper:

Here are a few things you can do to get started:

  1. First, you have to get clear on what you owe. Pull out all the statements. All of them.
  2. Write each debt down on a sheet. See debt worksheet attached to this post.
  3. Create a snowball or an avalanche plan of attack (explained below).
  4. Review your budget for opportunities to prioritize the debt.
  5. Pick 2 – 3, if possible, areas where you can reduce spending. Most likely categories are Transportation, Food, and Entertainment.
  6. Reduce those areas and shift spending to the paying down debt category.

For example: let’s say you have a “shoe habit” and looking at your budget you spend a lot on shoes. Consider, temporarily, buying 1 pair of shoes per month vs. 10?

Example # 2: Let’s say you eat our 4 nights a week. The average American eats out 4 to 5 times a week. YIKES! Check out this article from Simple Dollar. Possibly take lunch and eat out 1 time a week.

I know anything I suggest will be met with resistance and I get it. Totally get it. Think about the alternative? Doing more of the same is just going to get you more of the same.

Pick the categories. Slash some money. Move the cash over to your debt payoff category. You can do. I know you can. You’re stronger than you think.

Let’s talk strategies for paying off debt as I mentioned above.

The Snowball vs the Avalanche

The Snowball I learned from Dave Ramsey.

List your consumer debts

  • Once you have your list order them from smallest to largest debts.
  • Pay off with all the extra money you just moved into the debt category as you can WHILE still paying the minimum payment on the remaining cards.
  • Once you paid off the smallest one, you then move all the money you were using to pay off that one and do the same with the next.
  • Hence the snowball.

HERE are all of Dave’s forms, free online.

HERE is his debt snowball form. Nice. Thanks, Dave.

The Avalanche

  • I heard about this on a podcast.
  • It is the reverse of the Snowball.
  • You take the LARGEST and pay that off first.
  • Just like the snowball you take as much extra cash as you have in the category while still paying the minimums on all the other cards.
  • Once the largest one is paid off, you move to the next in order of size (2nd largest in this case).

The psychology for each are:

Snowball – Quick wins. Builds momentum. Takes longer on the back end.

Avalanche – You get the biggest beast off your back first. Takes longer on the front end but then the rest move along quickly.

It is really your preference. HERE is a fun calculator from Magnify Money that I found that can help you decide based on payoff what would work best for you.

Lastly HERE is another blogger, The Budget Mom, that talks about the avalanche method that is super clear and a good read. She has a downloadable worksheet too! Check it out!

I am always thinking of you, praying for you, knowing you’ve got this.

Much love,

Karen & Bill Debt Worksheet May 2018

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