Sunday, January 1, 2012

Happy New Year

Well, here it is, another year.  A year still full of promise, hope and possibilities.  I have been writing a lot about how much I owe and why I am in this situation, but I have not really written about my plan.  If you are like me, you may have read several books on finances, getting rich, or any type of money self-help book that looked interesting.  In fact, that is how I came to begin this blog, I saw David Bach on the Today show and he said something that spoke to me, "Become debt free for life."  That spoke to me because there have been many times that I have almost gotten out of debt, just to turn around an put myself right back there again.

I have heard this story from so many times from people I have spoken to, they have refinanced their house to pay off credit cards or car loans just to turn around and charge up all those credit cards again.  I personally have done this at least 4 times in my life and each time I justified doing it with some sort of contrived story about needing house repairs or adopting my daughter when in reality if I just lived within my means and did not charge I could have saved cash for those items from the beginning.  So that is why David Bach spoke to me so poignantly the other day, I do not want to pay off my debt, I want to change the hold money has on me and be debt free for life.  Like cigarettes, alcohol, drugs or sex these things can all get in the way of life and take over, that is how money is for me, it is an addiction to me because it controls me instead of me controlling it.

I have done research on many systems of how to get out of debt, and the one that I have decided to use is the old fashioned "Snowball" method.  Again like the envelope system, what's old is new.  The theory behind this program is that you take all your debts, find out how much your total balance is, your interest rate and your monthly minimum balance.  Then you put them in order of lowest outstanding balance to highest outstanding balance, find an extra amount you can afford to pay (this is the initial snowball payment) and then starting with the lowest balance you begin to payoff the debt including the initial snowball payment and when that debt is paid in full, you take what you were paying on that debt add it to the minimum payment of your next debt and then pay until done and so on.

I have found a free excel worksheet with all the formulas done for you, you just have to plug in the debt name, balance owed, interest rate, minimum payment and initial snowball amount and it will calculate for you your projected debt free date.  The webpage explains a bit about how Snowballs work and then just click on the "Debt Snowball Calculator" to begin creating your own worksheet.

So, here it is my projected debt free date: July 2018.  I know that seems far off, but considering we are looking at paying off $143,000 in debt with only an initial snowball amount of $25.00 I think that 6 and half years is not so bad, that would mean that I could be buying my house cash in less than 10 years!

So, I would love to hear your debt free dates, anyone out there ready to change their way of thinking???

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