Are you in debt? If so, you are in company with millions of Americans. However, 2012 can be the year that you resolve to be debt free or to significantly reduce your debt.
My preferred method of paying down debt is two pronged—use the debt snowball (pay down smallest to largest debts, regardless of interest rate, and apply as much as you can to the lowest debt while paying minimums on all of the other debts) and snowflake money (find extra money throughout the month to apply to your debt immediately, as you earn it).
Since late October, my husband and I have been using this two pronged strategy to pay down nearly $5,000 of our debt. We were able to make progress so quickly by snowflaking. Here are a few ways we have been able to successfully snowflake:
- Sell your “stuff”. Look around your house. What do you have that you haven’t used for awhile? Do you have a treadmill that you hang your clothes on and haven’t actually used in three years? Sell it. Old textbooks lying around from last semester? Sell them. Outgrown baby clothes? Yep, you guessed it, sell them. In a six week spurt, we sold most of our kids’ outgrown baby clothes and gadgets like high chairs and bouncy seats on Craigslist and eBay. We also sold a dishwasher we no longer needed. In the six weeks, we made a little over $700.
- Use your “found” money. Until you pay attention, you may not realize how much found money you have every month. (Found money is money you get that you weren’t expecting or money that you thought you would have to pay out but didn’t.) My son attends a private afterschool program two days a week, and in both November and December, we had to pay $110 less than we normally pay monthly because of vacations and holidays. That was money we would have paid anyway, so it was easy to snowflake. Other sources of found money could be rebates, money you save by using coupons, change you save during the month, insurance reimbursements, flexible spending reimbursements, and monthly bills that are cheaper than you expect, to name a few.
- Get extra work. Perhaps you can find an extra job in addition to your full-time job. If you make an extra $200 a month at your second job, snowflake all of that money on your debt to see it disappear faster than you thought possible. I took on one extra job specifically to snowflake. I can decide to work one to four hours a week with this job, so I am motivated to work as much as I can because all of the money will go to my snowflake.
If you are trying to pay down debt, don’t dismiss the idea of selling stuff around the house. Once you look around, you may find many things that would better serve to be sold and pay down your debt rather than sitting in your closet gathering dust. Likewise, many of us have the unfortunate habit of simply absorbing any extra money we make or “find” into our regular budget.
Instead, snowflake it immediately on your debt. Using these strategies, we have been able to make a significant dent in our debt and shave off the number of months it will take to become debt free. I am confident you could have the same success.
More information about debt snowballing: http://www.thinkmoney.com/
*Photo by LaoWai Kevin*