Get Yourself Out Of Debt: The Series: Part 4

Get Yourself Out Of Debt: Step 4: Snowflakes From Frugal Living:

Hopefully the first 3 steps in this series have you at least planning how to improve your own situation.  By the time you reach this step in the plan, hopefully you have a well balanced budget and have started your own debt snowball.  So what’s next?

Enter The Debt Snowflake:

What the heck is a debt snowflake you ask? The debt snowball is like the engine in our debt repayment machine… debt snowflakes are like putting a turbocharger on that engine.  To be more specific, the debt snowball is paying down your debts at a set rate with a predetermined out of pocket expense to you. So what if ol’ grandma gives you a $100 bill for your birthday?  Feeling compelled to improve your situation more, you write a check for that extra $100 and make an extra payment mid-month to your current loan under attack by the debt snowball.  This micro-payment is called a debt snowflake.  It is an extra principal payment that knocks your balance down so that the next months debt snowball payment is already ahead of schedule. Sometimes we have sent in a half a dozen extra micro-payments of $20 or $50 dollars when we got really motivated and boy did it help.  By doing this your $100 from grandma ends up saving you $115 since you don’t have that extra interest.  Like I said… turbocharge!

How can you get extra money for snowflakes?

There are tons of ways to get extra money for snowflakes.  Notice I said get… not necessarily make.  You don’t have to actually make $20 extra for a snowflake payment, if you do something frugal that saves you $20 that month… that is $20 from your budget you can put towards a snowflake.  Starting to make sense? I hope so. Snowflakes can come from extra income, gift money, money saved or many others… as long as it is money made or freed up in the budget… it counts.

Some recommendations for snowflake payment funds:

  • Contact your cable provider and just get the basic cable or drop cable and use rabbit ears, you can free up an extra $20-$60 a month doing this.
  • Drop your cell phone all together, save an extra $50 a month. If you can’t handle that, do a tracphone or something of the like for emergencies (costs like 9 bucks a month), save an extra $40 a month.
  • Make your own household cleaners every month, saves $10 a month
  • Brown bag your lunches every day, saves $100 a month or more
  • Cook at home instead of eating out, saves $5-$10 per person for every meal you make at home
  • Contact your credit card companies and demand a lower rate.  Tell them you are thinking of transferring a balance and might be interested if they lowered your rate.  Tell them whatever you have to to get them to lower your balance.  We had several credit cards at 12% and 15% which we got lowered to 9%-10% after simply calling them and demanding it.  If you drop your APR by 4-5% on a 5k balance… that’s real money.
  • Use cash gifts from family for snowflake payments.  But you deserve a gift… give me a break… you already got your gifts… now you need to pay for them.  Come up… grow up.
  • Embrace frugal living.  We have cut out so much fat from our budget just from trying and adopting frugal living habits.  While each habit may seem like it only saves a dollar or two a month… guess what, if you do a dozen of them, that’s an extra $25 bucks.  It adds up. There are hundreds of frugal living tips in our Frugal Living Section, see for yourself.
  • Re-visit the budget.  This is a living document in the sense that you don’t just make it and ignore it.  Tweak it as you go along and squeeze out every penny you can as you re-engineer your bad spending habits.
  • Instead of going to the movies with your friends on the weekend, stay home and fill out a couple online paid surveys.  Maybe you will make $10 or more dollars instead of spending $20 at the movies.
  • Have a garage sale.  We had one early on and made almost $400 from it.  We need to have another one while I’m thinking of it.
  • Use your imagination.  If you spend money on it… find a way to make it cheaper!  Use the savings for debt snowflakes!

Do you see now? When you only have an extra $20 in your budget to put towards your debt snowball… coming up with yet another $20, $50 or $100 debt snowflake just turbocharges your progress.  If you can come up with an extra $20 a month through frugal living, that’s $240 a year… $50 a month is an extra $600 a year and if you can manage to scrounge, save and rummage an extra $100 a month… that’s $1200 a year.

It all adds up! You can see now how in reverse, spending money beyond your means compounds your debt in the bad direction.  So every time you pull out your wallet, think to yourself…”Do I really need this, or would I get more enjoyment out of sending that money to pay off debt?”.  I choose debt every time.

Get the debt paid off first, then you can buy yourself those fancy coffee drinks or electronics… WHEN YOU CAN PAY IN CASH UP FRONT! Seriously, it’s a mindset… you need to re-engineer your way of thinking. Nobody is going to just call and magically pay your debt off.  You need to take responsibility for your debt, suffer through hard work and with determination you can be debt free.  There is a wonderful guy I will talk about more coming up named Dave Ramsey, he has this saying… “Live like no one else so you can live like no one else!” Think about that, let it set in.  Live well below your means now so that you can afford to live at your means later.

NEXT: Part 5 – The motivation problem

Read on: Our get yourself out of debt series continues….

*Note: This article is meant to be a general example of how one would get themselves out of debt and an explanation of how we are getting out of debt.  I am not a certified financial planner nor am I a CPA, so this article should not be considered financial advice, but a general guide for inspiration.

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