I’m a big fan of Dave Ramsey and his debt snowball plan. I think it is probably the easiest approach for most people to get started with getting out of debt. I’m following the majority of his plan, though not exactly as Dave outlines it- no offense Mr. Ramsey.

If you haven’t seen it, here is the basic Ramsey plan:

• Stop using your credit cards
• Make a written budget
• Get current with all of your bills if you aren’t already
• Suspend retirement savings
• Save $1,000 for an emergency fund
• List all of your debts from smallest balance to the largest
• Pay minimum payments on all debts, but pay any extra money you can find toward the smallest
• Work your way down the list, rolling the payments from debts you pay off into the next one on the list
• Once you are debt free except for the house, save a 3-6 month emergency fund
• Resume retirement savings
• Pay off your house

I am following the overall structure of the plan, but I have made a few modifications. Rather than paying off my smallest debt first, I decided to attack my highest interest rate credit card, which also happens to be my largest credit card balance. See the details below and I think you’ll know why I did this.

• $10,110.72 @ 11.9%
• $7,120.97 @ 4.63%
• $5,535.76 @ 4.99%
• $1,702.75 @ 3.99%

Not all of those lower rates are fixed for good, but they will last a while and the finance charges on the high rate card are more each month than the other three combined. It just makes too much sense to pay the high rate card first. Overall, the credit cards taken as a whole are the smallest debt when compared to the student loans and the mortgage, I’m just not breaking down each card in order to pay the smallest first.

In my opinion, the most important part of this process is tracking your spending and making a budget. As Ramsey says, write down every dollar on paper, on purpose. You really have to plan every single dollar and make sure you balance everything each month. Doing this step was like getting a raise. I’ve found so many ways to cut my spending and I’m making very nice progress on my debt snowball now. Look for a post soon that will cover my budget in detail.

The rest of my debt snowball seems a long way off, but I will attack the student loans after the credit cards, then the mortgage. I will most likely boost my emergency fund and start some investing after the credit cards are gone. My student loan rates aren’t great, but I don’t want to delay investing and savings any longer than I have to. Of course, I have some time to figure this part out, so my plans are subject to change. I wanted to share this to help you get a feel for where I am coming from and how I am working at getting out of debt. I hope it helps someone too!

By Eden, Fri 12 Oct 2007, 5 Comments, Categories: Debt, Finance

Last month, I intentionally held off on making some extra payments on debt. I wanted to try something new in October, something really crazy that I never thought I could do- paying my bills when they arrive! I wanted to pile up some cash so I could get ahead on the regular payments and not be on the usual paycheck to paycheck cycle.

Maybe paying the bills when they arrive is normal for you, but here is how my typical month would go. The month begins and the bills start to roll in. I start by paying the credit cards due at the start of the month, I’m careful to never pay those late of course. Next on the importance list is the mortgage, but typically after making the early month credit card payments, some car insurance, cable TV (auto deduction or I could delay it), then I don’t have the money for the mortgage until my next pay day. Over the past few months, this has left me going to the bank on the last possible day that I can pay the mortgage without a late fee, then generally having to juggle a few things and cross my fingers a bit that nothing unexpected will show up in my account and send that big mortgage check bouncing. Not fun!

This month is a whole new experience. I had the mortgage check in the mail before the 1st of the month! Today is the 4th and I have paid every bill but two, and those two are due around the end of the month. I know this may be hard for some to do, especially if you are stuck on the paycheck to paycheck cycle (right where I have always been), but if you can somehow start saving money ahead of the next month I think you will be pleased with the results.

I already feel much more relaxed and if something odd does happen with a payment not getting applied or some other bank error, I will probably have a chance to correct it before any fees are assessed. I think with careful budgeting and continued hard work at earning some extra money I can keep it up. We shall see!

By Eden, Thu 4 Oct 2007, Categories: Finance

I started this blog with the desire to improve my finances and hopefully help someone else do the same. Shortly after starting work on improving my financial life I decided to attack my weight problem too. Since making that decision I decided to relaunch the site with a new name and URL. So….welcome to the new Finance and Fat blog!

Now that I have finally decided what to write about, look for more frequent posts on both losing weight and gaining wealth. Also, look for a new site design shortly, hopefully ready to be rolled out today.

By Eden, Wed 26 Sep 2007, Categories: Fat, Finance