I started this Becoming Debt Free series in August after reading Dave Ramsey’s website about the Debt Snowball. Since then, I have made tremendous progress; more specifically, I’ve paid down $8,161.51 in debt. But there’s a big problem. Dave Ramsey’s plan does not work best for my financial situation; in fact, it has set me back!
As I prepared to write this post, I was excited to share that I’m less than $3,000 away from paying off my car…. Then the math stopped me in my tracks. As I crunched the numbers, I realized that $845.87 in interest has accumulated on my student loans since my last update in September, despite making my monthly payments!!! Arrest Your Debt was right, Ramsey’s approach to debt payoff is outdated. I’m gonna tackle the student loans immediately and make minimum payments on the rest. Y’all ready?
- Student loans (Was $139,530.76 on 8.1.18): $141,073.58 (as of 12.11.18) — It grew $845.87 since September! Probably over $1,000 since I started this series…
- Hyundai (Was $30,503.06 on 8.1.18): $27,850.62 (as of 12.11.18)
- The vehicle is financed at 0%, so I’m not worried about this one. The price goes down every month as we make the minimum payments.
- Toyota (Was $9,802.90 on 8.1.18): $2,957.80 (as of 12.11.18)
- Though the original plan was to pay this off by January 31st, switching back to the minimum payments is smart considering it’s financed at 2.2% whereas the student loans are financed at 5.5%. Even with minimum payments, it will be paid off in full in November 2019.
Invisible Braces: (Was $1,312.51 on 8.1.18)Paid in full
I’m going to focus all extra resources on the student loans instead of keeping with my original to pay off debts from smallest to largest. Though I had some peace of mind knowing that I had paid down $8,161.51 since August, I am very discouraged that I gained over $1,000 in interest on the student loans during that time by using Ramsey’s method. Live and learn, eh?
Since part 4, Rachel and I have decided to go back to combined accounts. Though I’m still the saver and she’s the spender, our new budget allows for her to have a “fun money” budget so that she doesn’t feel deprived as I allocate all extra resources towards paying down the debt. We also have a weekly date night budget.
I continue to drive for Lyft and Uber around 30hrs a week. I start a new part-time mental health job this week, which will pay me $100 per appointment. I also have another mental health side hustle in the works!
Starting my business and how it will impact debt payoff
The previous section is especially important because I will complete my counseling residency by the end of January and take the licensure exam. Upon passing, I will be starting my private practice for therapy. With me planning to quit my current job at the end of January, the side hustles are going to be especially important for keeping the bills paid.
I’ve been saving up $100/wk towards my future business, so I should have about $3,000 for startup money. During the transition from stable, full-time employment into self-employment, there will obviously be a drop in income. My debt payoff will likely be put on hold during that time.
I’m taking a risk to achieve my dream of being a small business owner! I foresee this leap of faith blessing me financially as my practice grows; thus, providing me with more resources to pay off debt and to eventually build wealth through investing.
The journey of becoming debt free is hard work! It has forced me to be more open-minded and disciplined. My wife and I continue to learn how to work together on this common goal, which is making us stronger.
What method of debt payoff works best for you? The debt snowball, the high-to-low interest approach, or something else? Let’s chat in the comments!
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