Recession Proof Living

Note: This is Part 3 of my “Get Out of Debt” Journey series. You can find the other posts in the series here.

At this point, we had our starter emergency fund ($1000) in place and were ready to tackle Baby Step #2 in our Dave Ramsey-style Total Money Makeover. We had figured out a budget that more or less worked for us, and were excited to have finally made some progress.

In FPU class, Chet and I learned about the Debt Snowball process. The idea is this: Make a list of all debts except the mortgage, smallest to largest. Throw as much money as possible at the smallest debt until it’s paid off, making only minimum payments on the others. Once the smallest debt is paid off, take the money you had been spending on that payment (plus any other money you can find) and attack the second debt. Repeat until all debts are paid off.

The idea is very simple, but very effective. It was extremely liberating to have a step-by-step plan to focus our energies, instead of spreading it out over several different goals. It helps you stay motivated and not get overwhelmed by a dozen different financial goals you “should” be pursuing. Instead of a dozen, we had ONE goal–one bill to pay off. All our extra time and money went toward that ONE tiny goal. When it was done, we moved on to the next one.

The process was simple in theory, but difficult in practice. For example, the air conditioner gave out in my car. Do we shell out $450 to replace it so I can be comfortable on my ten-minute commute to work, or leave it alone until we get some bills paid off?

We lived in a new house with no automatic garage door openers. Do we buy some, or keep paying off debt, grit our teeth and keep manually opening the doors for a while?

When I came home from work tired and didn’t feel like cooking, should I dip into the debt snowball money for a nice restaurant meal, or just suck it up and cook something?

People often criticize Dave Ramsey for advising people to pay off smaller bills first instead of bills with the highest interest rate.  It doesn’t make sense until you follow a family through the process.  We need to feel those little wins, especially in the beginning.

The fact is, getting out of debt was a tough slog for over a year. We were working extra jobs and selling stuff, but not getting to “enjoy” the money. It all went to paying off bills, or at least that was the plan. Sometimes we messed up. Sometimes we gave in and blew money that had been budgeted for something else.

But we got back on the wagon and kept trying. I tried to find ways to get excited again when the initial “rush” started to face away. More about that next time.