Welcome to Week 6! We’re just cruising along, aren’t we?
Were you able to find money to add to your debt? Which method did you choose? Or did you use a combination of methods like I did? When I start a project, I like to tackle it from every direction possible. That’s what I did with my debt. After reading Dave Ramsey, I knew that we were going to be primarily using the snowball method to pay down our debt. But for me, that wasn’t enough. I needed to feel like I was tackling all of our debts at the same time. There was something satisfying about paying even $5 extra on a bill; it made me feel like I was paying down all my debt instead of just one.
The most effective method we used, after the snowball method, was snowflaking. Every time we had some extra money, we sat down and figured out the best way to use that money. Most of the time, it went towards our debt (sometimes we treated ourselves because debt repayment is exhausting if you never take a break. We’ll cover this in an upcoming week). It was delightful to login to an account and make a payment mid-cycle. I liked this for two reasons: 1) It all went to principle and 2) I felt proud that we were working enough to make that extra payment. It really helped bring out debt down quicker, which was also nice.
But something else that was helpful was understanding our paychecks and exactly what all of the charges on our bills meant. For instance, as a public employee, we have to pay into a pension. It’s not a choice; it’s mandatory. However, until we earn a certain amount each year, our pension is not deducted from our checks. This is confusing unless you sit down with your checks and understand that your 503(b) plan is your pension; if you don’t know that, you just know that more money is being taken away from you.
It’s the same way with your bills. If you don’t understand what a $3.28 tax actually means or why you paid $9.99 for a premium service that you never signed up for, your money management will be all over the place. Why pay money, or have money deducted, if you don’t know what it’s for?
Task for this week
Following that logic, this week I want you to go through your paychecks and your billing statements. Write down any charges or deductions you don’t understand and contact someone who can explain it to you. If it’s a charge for service you don’t use, have it removed. If it’s a deduction for something you never signed up for, have it removed. Make sure you are being charged exactly what you are obligated to pay for and/or actually use. A word of caution: don’t let companies talk you into anything. Let’s say you call your cable company to have the second outlet fee removed because you got rid of that TV and don’t need to pay that extra $5 or so per month. Since they want you to pay as much as possible, they may try to convince you to upgrade an existing package, promising you a great deal. However, you know that you have only a certain amount each month to spend on cable and that package will put you above that amount. You need to stick to your guns and say “no, thank you. Please just remove this fee”. It’s tough but I know you can do it!