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How to Use the Debt Snowball System

There seems to be a trend on social media these days. Everyone is talking about being debt free, showing how they paid off their student loans or have paid off all of their credit cards. I am guilty of this too. The thing that gets me is most of these posts, while usually positive in nature, leave me feeling a little negative about myself. Let me explain.

I stumble across a picture of a woman who is showing her student loan debt completely paid off. She goes on to talk about how great she feels and how it has changed her life. I mean, congrats lady, really. However, I have never seen a post like this where the person lays out, step-by-step, exactly what they did to pay this debt off.

Most of the time the post will disclose what method they used. Then, it will direct you to a link to a website where you can buy their latest e-book on their secret debt repayment system. Well, that’s how they did it! They used the money from the sale of their e-book and paid off their debt. Mystery solved. This leaves me feeling defeated because if I am looking for a way to get out of debt, the last thing I want to do is pay $49 for an e-book!

There is nothing wrong with monetizing your knowledge in order to help others. However, call me old-fashioned, if you really want to help someone shouldn’t you just do it? Okay, okay, okay. Let me get off this soap box before I go off sis. My point is, I want to know exactly how to pay of a large debt (like a student loan) and I want my hand to be held the whole time. Well, I am about to break it down for you. Take my hand and let’s talk about the “snowball” method.

The Debt Snowball

Maybe you’ve heard of the Debt Snowball Method? Maybe you haven’t? Dave Ramsey explains this as”…a debt reduction strategy where you pay off debt in order of smallest to largest, gaining momentum as you knock out each balance. When the smallest debt is paid in full, you roll the money you were paying on that debt into the next smallest balance.”

Picture rolling a small snowball down a hill. As it gains momentum, the snowball gets bigger and bigger. Now picture that the snowball is your payment and the hill is your debt. Can you picture it? Okay, now let’s dive into the details. Here is how I used the debt snowball method to pay off my credit card debt.

Getting Started

First, you need to gather all the debt you are wanting to payoff. Next, download my Debt Snowball Tracker sheet and fill in the names and starting balances of each of your debts. You want to write these debts down in order from smallest to largest. On my tracking sheet there is a section where you can write in any notes. I just used that area to write down the total amount I had budgeted to go towards paying off my credit cards every month. My budget was $245 per month. This helped me make sure I was doing my calculations correctly every month.

Next, figure out what your maximum budget is for repaying these loans every month. Make sure that you include minimum payments for all of your debts. As in my example above, I have 7 credit cards. My minimum payment for each credit card is at least $25 per month. That equals to a minimum of $175 ($25 x 7 cards) every month in total. I figured I could wiggle in an additional $70 each month. This is how I arrived at my $245 monthly total. ($175 + $70)

Now, what this means is that my first debt with the smallest balance would receive an initial payment of $95 ($70 +$25 minimum payment). This single payment eliminated that debt completely. Which means the next month, I would take this $95 and apply it to the next debt in line, along with the already established $25 minimum payment. This means I paid $120 to my second debt the following month. Are you following what I’m throwing down? Stop me if I am not making sense.

I continued this process of “snowballing” the previous debts monthly payment and adding it to the next debt payment. By the time I paid off 6 of the 7 credit cards by using this method, my final payment was $230.42. I was able to cover this final payment with the entire $245 monthly budget I had already established. I was able to pay of 7 credit cards in under 6 months.

Types of Debts

The snowball method can be used to pay off any type of debt. Although it works great for credit card debt, it can be applied to virtually any financial situation. It can be used to pay off student loans, mortgages, and car loans. I’ve seen people use the snowball method to pay off other debts too like gym memberships and daycare. The possibilities are endless if you get creative enough. Also, you don’t have to use my tracking sheet for the snowball method to work. You can create your own tracking sheet if you want. Heck, a plain old notebook would work just as well. This is just something I created on my computer that worked for me and helped me stay organized. It is available to download for free in my “Free Stuff” section of my blog if you’d like to have a copy to use.

So Now What?

I’ve had a lot of people ask me “What now?” since I’ve paid off my credit card debt. “Does this mean you are debt free?” No…far from no actually. I currently have a six-figure student loan debt that I am paying off. I am using the snowball method to pay it off as well. Now, in addition to my monthly loan payment of $318, I have added the additional $245 that I had budgeted for my credit cards and applied it to my student loans. I now pay $563 every month towards my student loans. It might seem like a splinter in a snow storm to some. However, I know that chipping away at it will eventually lead to me destroying it.

Now, I have a question for you. Have you decided to use the snowball method? If so, what kind of debt are you using it to pay off? Leave your comments below. I love hearing other peoples success stories and being able to pass on words of encouragement to others. Till next time…

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10 Savings Challenges to Build Your Savings

So, you want to save some money do ya? Maybe you need to know how to start or maybe you’re already saving money but want to see a little boost in your balance. Well, you’ve come to the right place. Here are 10 savings challenges you can use to build your savings.

If you’re a Pinterest junkie like me, you have probably seen thousands of different saving challenges. Heck, I even wrote a blog post about how to save $10,000 in just one year. Interested? Check it out here. This is a great challenge, but I wanted to find ways to save more money. Also, I wanted it to be as simple and painless as possible. Now here we are! I have designed 10 super easy mini savings challenges.

These savings challenges are great for beginners who want to start their savings. They are also perfect for the experienced saver who wants to periodically increase their savings balance. Also, these savings challenges could even be used by kids and teens who want to get into the habit of saving money. There’s something here for everyone.

Are you ready for the meat and potatoes? Let’s go!

1. The Ten Cent Challenge

Do you have a bunch of loose change laying around? Maybe in your car? Your couch cushions? If you do, then this challenge is perfect for you.

Here’s what you will need:

  • 2 liter bottle (empty)
  • Dimes

Start by rinsing out a used 2-liter bottle. Make sure it is completely dry before using. Next, place all of your dimes into the bottle. Continue doing this every time a dime crosses your fingers.

Once the 2-liter bottle is full, you can cash it in at your bank or a coin-to-cash machine inside most local grocery stores. However, be careful. These coin-to-cash machine usually charge a steep percentage to use their machine. (some are upwards of 11%!) I prefer to take mine to my bank because they do not charge a fee.

If you’re 2-liter bottle is filled up to the brim, you should have close to $500 saved! Not too shabby, right?

2. The $5 Bill Challenge

For this challenge, you will need to do a couple things first:

  • Determine the amount of time you want the challenge to last

and…

  • Find a container or jar you want to fill up

Now, for the easy part. Every time you come across a $5 bill, place this in your savings container/jar/envelope/etc. For example, say your paying for a $3 smoothie with a $10 bill, you would get $7 back in change. In a perfect world, you would get one $5 bill and two $1 bills. You would take the $5 bill and place it in your savings container. Once this container is full or the amount of time you have designated for the challenge has ended, tally up your savings.

The last time I did the $5 bill challenge I managed to save $685! I used an old holiday cookie tin as my container and I saved for three months. I just started this challenge again at the beginning of January. Hopefully, I will be able to save even more this time around.

3. $20 Weekly Challenge

This one is pretty simple. Every week you put aside $20. This process continues for 52 weeks. After 52 weeks have passed, you will have saved $1,040! I use this challenge every year. I designed this cash envelope to use specifically for this challenge. Every week I place $20 into this envelope, I cross off the corresponding week printed on the envelope. Having a visual can be a real motivator. If you would like a free printable envelope to use for this challenge, you can get one here.

If you would like to use this

4. A Dollar A Day

Yep, you guessed it! This challenge is pretty simple. All you do is save $1 a day, every day. Don’t worry if on some days you don’t have a paper dollar to save. You can even use coins.

After thirty days, you should have $30. After sixty days, you should have $60 and so on and so forth. If you continue this for an entire year, you will have saved $365…$366 if it’s Leap year.

5. $2 Tuesday

That’s right folks! Tuesday’s are not just for tacos anymore! Every Tuesday, I save $2. I know, I know, it’s not much but it definitely adds up. Just by saving $2 every Tuesday for an entire year will save me almost $100! I even found a super cute taco themed piggy bank on Amazon that I use for this challenge. Get yours here.

6. Paycheck Pinching

Pinching your paycheck is really not a new concept. In fact, it is probably one of the oldest savings techniques in existence. Here’s how it’s done.

When you receive a paycheck, you save a percentage of it right off the top. This is done before you pay any bills. I like to think of it as “paying myself” for working so hard.

How much of your paycheck do you save? I would recommend between 10-15% if possible. For example, if your paycheck is $1000 then you would take $100 from that for your savings challenge. If you are paid bi-weekly and use this savings technique for an entire year, you will save about $2600. That’s a nice little chunk of change for your savings account.

7. The Loose Change Challenge

Ok, so maybe this is the oldest savings technique in existence. There are many of us that have a jar or tray where we toss all of our loose change in. Amiright?

When I was a kid, my dad would empty out his pockets whenever he got home from work. He had an old metal bucket on his nightstand that he would throw all of his loose change into. After a few weeks, his bucket would be completely full. He would bring home coin wrappers from the bank and my brothers and I would help roll his coins up. He always took us out for ice cream afterwards. Hard work pays off!

I have implemented something similar. I just use a regular old piggy bank. Any time I have loose change in my pockets or in the bottom of my purse, I fish them out and toss them in Peggy the Pig. (except for the dimes! I put those in my 2-liter bottle!)

I have filled Peggy up multiple times. Each time I was able to save between $40-$65 just by saving my loose change. Give it a try and see how much you are able to save.

8. Three Dollar Hump Days

There are two types of camels. Camels that have one hump are called dromedary camels. Camels with two humps are called Bactrian camels. Pretty interesting, right? I know.

Well, the only thing this challenge has in common with camels is that it occurs on Wednesday’s which is also known as “Hump” day. Here’s how it works.

On Wednesday’s, you save $3 dollars. You can use a cash envelope, a jar, a shoe box or basically anything else you would like to use.

Ready to try this challenge? If you save $3 on every Wednesday for a year, you will have saved over $600!

9. A Quarter A Day Challenge

This challenge works great with an empty jar…actually any jar or bottle would work. Every day, you simply drop a quarter into your savings jar. If you do this for an entire year without missing a day, you will save approximately $90 in cold hard cash.

This challenge always amazes me. Saving as little as twenty-five cents every day can add up to a pretty penny. 90,000 pretty pennies to be exact.

10. Weekend Clean-Up Challenge

This challenge gives you a bit more freedom. This challenge isn’t the best one to use if you have a specific dollar amount you are wanting to save. However, if you just want a casual savings challenge that has the potential of creating an extra $48-$1200 every year, then this one is for you.

On the weekend, open your wallet. Pull out all of the paper bills you have in your wallet. If you have more than one bill in your wallet, pick one of the bills you want to save. Let me give you an example. So it’s Saturday and I open up my wallet. I have three $1 bills, two $20 bills and three $10 bills which total $73. I select one of the $10 bills and put this into my Weekend Clean-Up savings challenge. Rinse and repeat…every weekend.

Depending on the denomination of the bill you select for your savings challenge, the savings pot will begin to grow. Even if every weekend you always select a $1 bill to save, you will still end up with $48 in savings.

Whoop! There it is!

There’s all of the 10 savings challenges that I like to use to help build my savings. You don’t have to use all of these, you don’t even have to use any of these. My goal is to show you that there are many ways to save and that saving can be fun. Do you have a savings technique that works best for you? What savings challenges are you currently using? I would love to hear about it! Leave it down in the comments!

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Save $10,000 in 52 Weeks!

Savings! It seems like it’s all the rage now, right? Right, that’s because saving is important. Being financially prepared for the expected as well as the unexpected can really be a stress reliever. Think back to when you had a large unexpected expense. Maybe it was a major car repair or the loss of a job. This can be a huge financial burden for someone who is unprepared and has little to no savings. Whatever life may throw at you, having a little savings cushion is always helpful. Here is how you can save $10,000 in 52 weeks!

How Much Should I Save?

This isn’t one of those one-size-fits-all type of questions. The amount of money you should save depends on your goals. However, financial experts recommend saving at least three to six months worth of income. Although, $10,000 may or may not be three to six months worth of your particular income, I find it is a decent size wad of cash to stash away for a rainy day. Here’s how to do it and save $10,000 in 52 weeks.

How Does This Work?

It’s quite simple. For each week listed, you need to save the corresponding dollar amount shown. For example, the first week (Week 1) you would save $50. The following week (Week 2) you would save $150 which would bring your total amount saved to $200. Finally, continue moving forward with each week that passes. I find that it is helpful for me to print out the chart and either highlight or cross-out each week as I save. It not only gives me something physical to refer to but also serves as a visual. This technique makes it fun for me to save and keeps me motivated.

Hard Work Pays Off

Ultimately, as long as you stick to this schedule, you will have saved $10,000 in 52 weeks. This chart can help you save for multiple goals. This would be helpful if you are buying a new car or maybe planning on purchasing a home and need to save for a down payment. Using the chart above as a guideline will easily help you get on the right track towards ten G’s. Want to try more savings challenges? Here are a ton more you can incorporate into your life to save even more money!

Happy saving!

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What in the World is a Sinking Fund???

I’m glad you asked. I have heard budget bloggers talk about sinking funds and how important they are to their financial well-being. I would be so amazed by the large amounts of money people were able to save all while making it look so effortless. However, I always thought to myself “I’ll check into that later” and then conveniently forgot about it…until a few months ago.

So, let me take you back to August 2019. I am sitting on my couch enjoying the ice cold air conditioning (it’s August in Arizona. Need I say more?) and I’m running through my head Christmas and birthday gift ideas for my kids. They both have birthdays in December, lucky me. Naturally, I start running an invisible tally in my head until I make myself queasy from the grand total. That’s when a little voice in the back of my head (like way in the back…like under a box, even) whispers “try sinking funds, you must.” That’s when I actually made the effort and dove head first into sinking funds. I haven’t looked back since.

Sinking funds are money that you set aside to help soften the hardship of an expected future expense. These are expenses like holidays, birthdays and vacations. It makes it more manageable to save small amounts of money over a longer period of time versus trying to save a huge wad of cash in a short amount of time. I like to think of sinking funds as the chisel that is slowly chipping away at something. I know what you’re thinking. Melissa, isn’t this like an emergency fund? Let me explain.

Sinking Fund vs Emergency Fund

Although they may look alike, talk alike and sound alike, they are more like cousins than sisters. Both sinking funds and emergency funds are methods used to save a large amount of money. However, here are the distinct differences between the two.

Initiating My First Sinking Fund

After I educated myself on what a sinking fund was, I decided to give it a try. I decided I need to find a way to save $800 by Christmas. Here’s a sample of me putting my thoughts down on paper lol.

This was my plan. If I put away $100 every paycheck for the next 8 paychecks, I’d have enough money for my December occasions. I decided to make a cash envelope for this sinking fund. This method made it easy for me to see my progress which only motivated me further. Get this free cash envelope here!

What Do I Really Think of Sinking Funds?

Honestly, sinking funds (IMO) are genius! It really isn’t a new concept, if you think about it. It’s reminiscent of my childhood piggy bank. I remember saving every penny I found so I could buy the new Corvette for my Barbie dolls. This is the same concept…only I am older and I don’t play with Barbies anymore.

I really enjoyed using a sinking fund for my December occasions. Utilizing sinking funds is something I will continue to do from here on out. In fact, I have already started my sinking fund for Christmas 2020. I created a cute cash envelope that also doubles as my tracking sheet. Check it out in the Free Stuff tab above. You simply download it, print it out and use it to save for your holiday spending. Happy saving!