Monday, December 17, 2012

Snowball Debt Effect

Seeing as this blog is called Skinny Budget I want to start sharing with you all, more posts on just how I budget. Whether it's for something in particular or just in life, I LOVE to budget! 
I want to reduce our debt to as minimal as possible...here's how I go about it :)

 I first came across the 'Snowball Debt Effect' whilst searching the net for alternative debt payment options, other then consolidating all our 'debt' with one company. I am by no means a professional financial adviser, but I am the budget person in our household and this certainly works for us :)

In 2011 we were using for a short period, a company that took care of our finances for us (not an easy feat when I am a bit of a control freak.) It wasn't the relief I thought it'd be, and if anything I became more stressed and irritated having to call the company constantly, inquiring on why companies were still calling me asking when a certain bill would be paid etc etc.

Having taken back control of our finances, I decided I wanted a system in place that would make bill paying and debt reduction, not only stress free but also beneficial to us. I.e Savings!!

So I came across the Snowball Debt Reduction Plan. You can Google it for a much more informative explanation but the way I have incorporated it into our household is as follows:

1/ I listed ALL the debt we have. I included the interest rate for each debt along with the frequency and amount of each payment for that debt

2/ I then listed each debt by the amount owing, starting from lowest amount owing to highest.

3/ The easiest way for me to keep track of everything, without it seemingly too over whelming was to draw up my own Spreadsheet (I used Excel). This way I can alter the budget should I need to, then print it out and stick it in my Home Management Binder (you can check out my post on this by clicking here).

4/ I've become SO aware of when I am failing at our budget keeping, such as with using our cheque account and not cash when Grocery Shopping!! I meal plan for a fortnight, and ultimately budget for that fortnights meals, HOWEVER because I am using our cheque account, I will often add items into the cart that weren't on the list. Making $200 quickly become $225. I am trialling out using a cash wallet envelope and I've come across SO many gorgeous ones for sale on Etsy BUUUTTT to save funds, I am using an old envelope style wallet I already have :)

I will do a review on that system very soon!

That's really all I do! It works for us so for now that's what we will be using :) Whether you have a family or you just want to get on top of your credit cards (or any other debt!) I'd recommend this system!



Hopefully you found this somewhat helpful :)

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