In my last post I discussed how I ended up in 37K in debt and what I started doing to steer clear of bankruptcy and pay it all off in just 5 years.
Now in part two, we are going to dive into the meat of my plan and how I did it.
So where did we leave off? Oh yes, here I was a single mother with two kids, no child support coming in, and working 6-10 part time jobs.
After doing my prep work (trimming my budget, calling my creditors to get interest rates and late fees lowered or removed and finding work to bring in some money), it was time to set some goals.
The Notebook
At this point I had this notebook going with everything I had been doing so far. It included my budget and the cuts I’d made, all of the calls I had made and debts owed. This notebook soon became my goal bible. Everything over the next 5 years that I did went into this old Taylor Swift notebook that I had snatched from my daughters room and I still have it to this day as a reminder of everything I accomplished.
With my prep work down it was time to get down to the nitty gritty. I made a list once again of all the debts I owed starting with the largest amounts owed and going down to the smallest. It looked something like this:
-Back Taxes-$12,647
-Credit Card One- $9,428
-Credit Card Two-$4,140
-Loan taken out by ex-$3,500
-Credit Card Three-3,390
-Credit Card Four-$3,111
-Credit Card Five-$1,275
Little Goals=Big Goals
I can tell you sitting there looking at all of these huge numbers was completely overwhelming. How on earth was I going to get this paid off? That is when I realized the only way I was going to be able to do this without feeling like I was making no headway at all, was to break this giant goal down into smaller goals.
The giant goal was obviously to be debt free, but the smaller goals, weekly and monthly goals, became my mantra and without them I would have never been able to get to where I am now.
The first thing I had to do was add each of their minimum payments into my monthly budget which was a little easier since I had that extra $300 to play with I had cut out of my budget when doing my prep work. I knew making the minimum payments on everything would never get the debt paid off so the goal was to pay the minimum plus some. After doing a little research on the best ways to pay off large sums of debt I decided that the “snowball” method made the most sense to me.
The Snowball Method
The snowball method consists of paying off your largest debt first and then once that is done using the money from that debt each month to go down to the next.
Here is what that ended up looking like for me:
-Back Taxes- monthly minimum payment $100Credit
-Card One- monthly minimum payment $100
-Credit Card Two-monthly minimum payment $75
-Loan taken out by ex-monthly minimum payment $50
-Credit Card Three-monthly minimum payment $50
-Credit Card Four-monthly minimum payment $25
-Credit Card Five-monthly minimum payment $25
Total $375
The Work Begins
Then the real work begin. I started by picking up every single extra job I could, every single extra project and working every hour I possibly could manage. The little goal here was to put as much money each month towards that first big debt (back taxes) and get it paid off first. In the meantime I continued to make the monthly minimum payments on everything else. At times I worked 80 hours a week, slept very little and felt like I was working myself to death, but I knew with every single day that passed, I was getting closer and closer to my end goal.
To keep myself motivated I posted my goals everywhere so I could constantly see them. I also posted what my motivation was. Not just to be debt free, but to work less, spend more time with my kids and have less stress and money woes. In that first year, by working as much as possible I was able to pay anywhere between $500 and $800 a month towards my largest debt and that was on top of the $100 minimum monthly payment. And 12 months later my first debt was paid off completely . The back taxes were off my list. I remember when I made the last payment I actually cried happy tears and then did a little dance around my house. I knew I still had a long way to go, but with each little goal I had set that year, I had made it one step closer.
Do not give up!
Now while I know many would have seen this moment as an opportunity go on a little spending spree with all of that extra freed up money, I knew I had to stay on track and work my snowball. Because the next step was to take the $100 monthly payment I had been making on debt one and apply it to debt two and apply any extra money I could there. Now debt two was getting a $200 minimum monthly payment instead of just $100 and I was putting anywhere between $500 and $800 extra towards it.
And so it went into year two, setting those smaller goals each month, posting them everywhere I could to keep myself motivated towards the big goal and this time it only took me 8 months to pay off that second debt. Again I cried, I dance and I snowballed it down once more.
Now that $200 plus $75 minimum payment went towards debt number three along with the extra money each month. As the months and years went by the progress I was making doing this was nothing short of incredible. Snowballing each debt like this was allowing me to make huge payments towards the debts and paying each one off faster and faster than the one before it.
By the time I got down to those last two debts I was making over $350 in minimum payments on them each month plus any extra money I made. The last two debts were paid off so fast I was completely shocked.
The end of the road
4 years and 7 months later and I was debt free. Every last dime had been paid back. I did not have to file for bankruptcy and I did not have to give my ex husband the satisfaction of leaving us broke. The best part was the pride I felt in knowing how hard I had worked and how setting those little goals and taking those little steps got me to the end goal. I was finally able to cut back on my work, start putting more money into savings, buy a new car, spend more time with my kids and now with an extra 175 points on my credit score, I never have problems getting credit if and when I need it.
I learned a lot about money during this time and now I am very smart with my money decisions. I am very careful with my credit and make wise choices with purchases. But what I learned about most was goals. I learned how important taking little steps towards the big leap is. How breaking any problem down into smaller problems makes you feel so much less like giving up. I learned how important goals were to my life and how important they would be to my future.
If you are in debt, know that you are not alone. Know that there is help out there and that you too, with some hard word and smarts, can get yourself out of it.
