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Our Debt Snowball

January 5th, 2013 at 07:06 am

This is it! The year we're going to conquer our credit card and car loan debt. Time to layout the plan so I can hold myself to it!

We are still only 3 months in to our Total Money Makeover. So far, getting our debt "snowball" rolling has been really slow going due to a number of unfortunate factors. Child support back-pay ended last month, and as glad as I am to finally be done with my ex-husband, it left a new $500 hole in our budget. We knew this was coming though, and could have handled it alone, but unfortunately, it overlapped with a slow quarter for me in my home business. I have been making only about 1/3 of my usual profits for this time of year. And then to make matters worse, just a month before Xmas my normally biggest contract of the year cancelled on me due to going out of business. That left us short another $1600, and was pretty much our Xmas "budget" out the window. The same week our newer car need a $1000 repair. Needless to say, its been rough.

The amazing part of all this though, (as I tried to explain to hubby tonight when he got all forlorn about how little actual credit card progress we've made so far), is that we have not dug ourselves in any deeper for once! Had we not started a budget and drastically reduced our spending in recent months, these problems would have crept up on as as they always did. With us already overspent and not knowing where we were going to come up with these extra funds. I would not have been at all surprised if we ended up putting at least $1000 or so on a credit card, even after wiping our emergency fund out. Nor would we have had any plan to restock the emergency fund before our tax return came in late Feb. But that's not how we're doing things these days.

Today, I can honestly say that we have not used a credit card in over a year, even for emergencies. That's a first. And that as of this Monday, despite Xmas being barely over, our emergency fund will be restocked with $1000. And that even after all that, if we stick to our budget, we may still have about $50 extra to put towards credit cards in Jan. That may not be much, but it's a heck of a lot better than where we would have been before all this.

But then Feb is where the real fun begins. The month we finally start getting some momentum on this debt snowball. Because due to circumstances previously discussed, we will be getting a huge tax return. Probably around $8000. And then come March hubby should be getting his annual bonus, which will probably be around $4500. And then in Apr., hubby's new promotion raise will kick in and he should start bringing home about $500 more a month (which BTW, cancels out that child support that ended. Sweet.).

In the past, we would have initially *said* we were going to put a large amount of this extra towards our credit cards. But as it got closer, our wish list would have grown and grown. We may have ended up throwing $1500 towards it, but the rest would have gotten set aside for "in case" or spent this way or that. Our goal this year though, is to send no less than $13,000 to our credit cards for the months of Feb & March combined. Hold me to this!

By the end of all this fortune we should have wiped out three of our four credit cards and will already be about 2/3 of the way to our 2013 debt goal. From that point on it will be more slow and steady progress. If we stick to it though, that last credit card should be gone by the end of June, and our car loan will follow at the end of Sept. And that will be it! Almost one year after we started to the date. And then on to baby step 3 we'll go!

If we stick to this plan, about 28% of our take home pay over the course of a year will go towards our credit card and car loan debts. Compare that with the only 7% progress we were making before. (And we were wondering why we were never getting anywhere?) A four fold increase. Not too shabby for only 3 months of restructuring. And who knows what else we'll come up with by then?

All of this, of course, is subject to change. I'll feel a lot more confident once the tax return, bonus and raise are in hand. Until then, they are only projections, not realities. (At least the fiscal cliff is done!) Also, who knows what else will happen with cars and appliances and goodness knows what else in the months ahead. I have estimated my business income a little on the low side to help offset this, but it being on the low side has been a reality for me as well lately, though one that is starting to improve. If necessary, we still have a 3 month buffer to make it to the end of 2013 credit card/car loan debt free!

All said and done, we have a plan, and now its time to get to it.

10 Responses to “Our Debt Snowball”

  1. Jenn Says:

    Good for you! I'm excited for you just reading about your determination to dig out of debt. It'll be fun to see your sidebar numbers change as the year goes on.

  2. creditcardfree Says:

    You are determined! I bet you will do awesome this year. Great plan you guys!

  3. Amber Says:

    Awesome, good for you on tackling your debt. Having your EF, not using a credit card are huge obstacles you all have overcome. That is great Smile
    I'm working in my TMO as well, and thus far have paid off 2 CCs, I'm just as excited for you because I truly understand.


  4. TexasDisneyGirl Says:

    Sounds like a good plan!

  5. Homebody Says:

    Getting DH on board can be the hardest and sounds like you have accomplished that so you go girl!

  6. twest Says:

    It sounds like you are very determined. You are not just saying we are going to do something about this you are making specific plans and that goes a long way. As Jenn said it will be awesome to see your progress this year cause I feel like with your determination you are going to get it done once and for all!

  7. North Georgia Gal Says:

    Sounds like you have great plan in place! Way to Go!

  8. annereese76 Says:

    Thank you everyone! I am feeling very, very determined about this right now. And I love this site because posting these plans out in the open where others can read and comment on them helps make it much more real for me. Plus public failure is so much worse than private, so now I HAVE to succeed! Wink Glad to have you all along for the ride.

  9. Jerry Says:

    Congrats on the past year of no CC use, that is an amazing accomplishment that will absolutely lead to financial progress. I agree that putting things in public offers some added insurance of meeting those goals, and I wish you well with them!
    Jerry

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