Snowball..could it REALLY work that fast?!
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  1. #1
    Registered User mama2James's Avatar
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    Default Snowball..could it REALLY work that fast?!

    I just enter our info into the free debt snowball calculator on the DR site and INCLUDING our house it said that we could be 100% debt free in 9 years, starting with only making the minimum payments we are making now and rolling them down the list..
    I used the actual balances and minimums etc.. estimated a couple of interest rates that I didn't have right in front of me..but I know I was close.

    We have 19K in credit card debt (10K interest free), 13K on a vehicle loan, 10K in medical debt interest free, 12K in student loan debt and 135K on the house. We have been paying the minimum due on the house for 4 years out of a 30 yr fixed loan. The currently monthly minimums all added up come to approx $2,500 including the mortgage. Some of the mortgage payment I entered though is actually taxes and insurance...oops! Just realized that..
    Even without the mortgage included it was such a short time to be debt free except the house, seems crazy to me!

    It hardly seems possible to me that we could pay all of this off in 9 years?! That's amazing...I am truly hoping that I didn't use the online tool incorrectly..so hoping that it's true and that I can share this news with my husband!

    Any insight anyone?

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    Sounds like it's in the ballpark. You'll have to double check with the real numbers, and "Murphy" will come play with you and slow you down (it happens with that much debt) but you should still be in the same ballpark with those rough figures.

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    Registered User CookieLee's Avatar
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    Sounds about right to me. You owe about $189,000. If you make payments of $2500 for 9 years, you'll pay a total of $270,000 ... more than enough to cover low interest rates. (9 years x 12 months = 108 months. $2500 x 108 months = $270,000)

    It is the idea of spending $270,000 to pay off $189,000 of debt that keeps us motivated.

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    Registered User mama2James's Avatar
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    wow! thanks for the encouragement! I will run the actual numbers as soon as I can. I will be 31 in July, so the idea of being 100% debt free by the time I'm 40 is mindboggling!
    We have recently set up a starter budget.. (basic income and outgo, still need to work on planning for sinking funds etc) We are finding that we do have wiggle room and should be able to pay more than the minimums each month. I also work only part time right now since I have two kiddos not in school yet..so there is more earning potential to help buffer Murphy's antics and/or add to the budget if we decide to do that.
    Feeling quite hopeful!

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    The real fun part of snowballing is if you can add more to it, irregular stuff that used to just disappear, like tax refunds, pay rises, reduced spending, etc.
    Debt: -$60 000
    Savings: $43 200
    Net total: -$16 800

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    Not to be Johnny Raincloud, but remember this well... That makes the assumption that you incur NO MORE DEBT and everything stays constant.

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    Registered User mama2James's Avatar
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    Quote Originally Posted by Russ View Post
    Not to be Johnny Raincloud, but remember this well... That makes the assumption that you incur NO MORE DEBT and everything stays constant.
    Yes! Thank you We have $2400 in an emergency fund right now, tax return is coming and we will make it a $5K EF. That is just under 1 month's take home pay so I feel ok about that amount. My plan is to then knock out the credit card debt as fast as possible. After that is done we will reevaluate where the extra in the budget is going..my thought is that we will split 50/50 between adding extra to the snowball and savings..by that point I hope to have a pretty clear picture of how much will be needed for the sinking funds to help protect us from any "need" for debt. Since the snowball I calculated in based on paying just the minimums, I figure that if there is something we feel we "just gotta have" that isn't an emergency we can continue the snowball at the minimum payment rate and put the extra toward whatever it is. In case of a true emergency, we could pause the snowball and just pay the actual minimums due.

    Quote Originally Posted by gaja View Post
    The real fun part of snowballing is if you can add more to it, irregular stuff that used to just disappear, like tax refunds, pay rises, reduced spending, etc.
    I am very excited about that! The biggest impact will likely be our tax refunds over the next couple years since we have 3 kiddos and are early in our mortgage and paying a whole LOT of interest

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    When you evaluate whether to split between savings and debt, etc., you may wish to notice if you pay PMI on your mortgage. We do, and had a 5 year minimum. But if we can pay down (in our case) $5K of principal above our normal payments by the 5 year mark, we can get it removed and suddenly have another $80/month that was going to NOTHING useful. In our case if something slows us down on our normal debt we still plan on making our 5 year mark, because $80/month is important for us.

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    Registered User zakity's Avatar
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    Another thing to consider that will slow down debt repayment is things breaking. Like expensive things like fridges and washers and dryers... We replaced our fridge last year and, a week or so ago, my washer broke (luckily, was only a $20 part to fix it). My dryer still isn't totally back together from when it broke a few months ago. (Handy husbands are a good thing, but they don't always follow through...)

    There are also the random huge growth spurts that children do. One day their clothes all fit, the next they are wearing a barrel with suspenders because nothing fits. One of my guys did this to me a while back. He did an over-night growth spurt and none of his t-shirts fit (your tummy showing is only cute when you are under 4). Unfortunately, he is in adult clothes and they are spendy. Having a twin who is chubbier than he is was a good thing. He borrowed a t-shirt so we could go hit a store or two to find some more shirts.

    These type of things suck down the EF pretty quick. And, if your household is like mine at all, it is nearly impossible to get the EF refunded because things always come up right as you think you have extra money to put back in.

    Then, there are also spendy upkeep things like cars needing tires and struts and other random expensive parts. Make sure you plan in money for these type of things.

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    Registered User mama2James's Avatar
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    Quote Originally Posted by ambroseya View Post
    When you evaluate whether to split between savings and debt, etc., you may wish to notice if you pay PMI on your mortgage.
    We don't pay PMI since we have a VA loan, very glad of that!

    Quote Originally Posted by zakity View Post
    Another thing to consider that will slow down debt repayment is things breaking. Like expensive things like fridges and washers and dryers...
    There are also the random huge growth spurts that children do. One day their clothes all fit, the next they are wearing a barrel with suspenders because nothing fits....

    These type of things suck down the EF pretty quick. And, if your household is like mine at all, it is nearly impossible to get the EF refunded because things always come up right as you think you have extra money to put back in.

    Then, there are also spendy upkeep things like cars needing tires and struts and other random expensive parts. Make sure you plan in money for these type of things.
    Very good points! For right now we are tracking those types of spending so that once the credit card debt is gone we can have an accurate idea of what we need for sinking funds for those kinds of items. If we find that the debt repayment will be significantly slowed down to meet the sinking funds goals, we will have to either find ways to bring in more cash or cut back on other spending. Not having specific sinking funds yet is one of the reasons I am more comfortable with a $5K EF than a $1K..if something is needed and the balance dips down, my plan is to repay it as quickly as possible and then get back on track with the snowball. Pausing it for a short time is much better than charging something, right?

    I know that we will likely not be able to throw huge amounts of "extra" money into the snowball without good sinking funds set up..which is why I was so encouraged to find that we could be debt free in 9 years even if we only paid out monthly the same as the minimums we are paying now

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    Also be sure to have your fun too so you don't get burned out and give up all together.
    You have a plan and both of you are on board. IMO those are the two biggest hurdles. Good job.

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    Registered User Zhoen's Avatar
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    You mentioned a VA loan, that means one of you was/is in the service. Is the servicemember still active? If so, do any of those debts you mentioned pre-date the servicemember joining up?

    I ask because any debt the servicemember had BEFORE joining can be reduced to a 6% interest rate under the Soldier and Sailor Relief Act of 1940-whatever. BUT it's not automatic, you have to call the creditor and they will tell you what verification they require. Some creditors will lower the rate effective when you notify them, others will credit it retro-active to the date entered service.

    Hubs and I found out about this ONLY after we'd paid off a bunch of his pre-service, sky-high interest rate debt. If we'd found out sooner, it could have saved us a bundle. One friend of ours contacted his creditor, they credited him the interest retro-active, and his balance disappeared!

    So, again, if one of you is still active in the service, and any of those debts are from BEFORE they FIRST joined up, then look into the Soldiers and Sailors Relief Act, and see if you can get any of the rates lowered. If you meet those qualifications, they legally can't refuse. (Except student loans, we all know those are a completely different demon...)

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    We did it. I took the Dave course and use Crown as my free calculator. We went from $300,000 to $15,000 in 8 years. No raises in that time,7 small christmas bonuses,cashed in a whole life policy for $33,000 and paid taxes on some of that. And paid over $21,000 in kids college. And I only worked 1 yr. of that.
    I couponed and skipped vacations altogether,we need a new furnace and 2 new cars. But it can be done. Havent been to the mall in 7 years and buy 80% used. We say no alot to ourselves. But J. Raincloud is right we now allow $100 x2 per month for fun/eating out.

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    Registered User khaski's Avatar
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    Math doesn't lie, if done properly. It's always nice to discover it'll be less time than you originally thought! There IS light at the end of the tunnel....

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    Registered User mama2James's Avatar
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    Quote Originally Posted by Russ View Post
    Also be sure to have your fun too so you don't get burned out and give up all together.
    You have a plan and both of you are on board. IMO those are the two biggest hurdles. Good job.
    Oh, yes..we are planning for some fun too. Only way to keep the hubster on board..I personally could stand to be very austere and cut things to the bone but he would revolt! Hobbies are very important to him, he does struggle with anxiety and depression and needs healthy outlets.

    Quote Originally Posted by Zhoen View Post
    You mentioned a VA loan, that means one of you was/is in the service. Is the servicemember still active? If so, do any of those debts you mentioned pre-date the servicemember joining up?
    My hubby was in the Air Force, but has been out since 2009. None of the debt predates his service..we were 19 then and didn't have two nickels to rub together, let alone any credit cards Thank you for the reminder though..I will share it with our active duty friends and family to make sure they are aware.

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