Mandi of Organizing your way is sharing 31 Days of Organizing for a Better 2010 all month long. Today she is tackling the topic of debt, a subject that really gets my blood pumping. Seriously. She asked me to share a bit of my personal experience in that area and I gladly agreed!
My husband and I began our journey out of debt in the fall of 2007 and haven’t looked back since. Our finances had become unmanageable, and we knew that we had to make a major change. We paid off our final credit card in July of 2008. There were several key factors that contributed to reaching our goal so quickly.
- First we drastically cut our spending by adopting a frugal lifestyle and learning to use coupons effectively.
- We then amped up our income in order to apply Dave Ramsey’s principal of the “debt snowball“. My husband took a second job and I began working at a preschool part-time.
- We followed a detailed monthly plan for paying off each credit card, beginning with the smallest debt and finishing with the largest.
One tool that was extremely helpful in staying motivated was a visual of our debt reduction plan. Although we had a sophisticated excel spread sheet set up for us by a financial advisor, we also opted for simpler method- a white board.
This white board hung in a prominent spot in our home to serve as a constant reminder of our debt and our goal. We updated it every month to stay on track. It looked something like this:
Average households in America actually carry an average of $8,000 in credit card debt. Gulp.
As you can see, we listed all of our credit card balances on the board from smallest to largest, along with the minimum monthly payment for each one. The farthest column on the right detailed the actual payment for the month. So the following month would look like this:
Rather than erasing the card we paid off, we put a big red line through it, with gusto! The psychological impact of this gesture was huge. We could see our progress, and it motivated us to continue our plan with fresh intensity each month.
While this method is a bit unconventional, it was exactly what we needed. You see, the reason our credit card had gotten so out of hand, is because we were simply in denial. We avoided opening the mounting bills, and were unsure of exactly how much we owed.
By laying it all out in the open, there was no more hiding from our debt. It was staring us in the face and was not going anywhere unless we stuck with the plan.
Eventually, the white board looks like this:
Each month, the actual payment stays the same, although everything else is changing. The balances start shrinking faster and faster, and the intensity picks up, hence the term “snowball”.
All those red lines served as a reminder of how much we had accomplished. Because paying off debt is not about math. It is about behavior.
Another key factor in our journey was applying the principals found in God’s Word. We learned, for the first time, what the Bible says about money. Once we decided to start honoring God with our finances, getting out of debt became top priority.
My husband and I are not completely debt free. We have a mortgage, and student loans which we are currently paying down. Writing this post was a fantastic personal reminder for me about how effective that simple white board really was. On my to-do list this week is a freshly updated board with those scary numbers.
For more inspiration, read why FishMama wants to live debt free.
Be sure to visit Organizing Your Way, as Mandi shares her tips for paying off debt.