Debate over “smallest balance first” vs. “high interest first”
“high interest first”
- List your debts from highest interest rate to lowest interest rate.
- Pay the minimum on all debts except the highest interest rate
- Take all extra money and pay off the highest interest rate.
- When 1st debt is gone take that payment + the payment for the next debt + all extra money and pay of the next debt. Keep doing this until all debt is gone.
“smallest balance first” – “Debt Snowball”
- List your debts from lowest amount to highest amount.
- Pay the minimum on all debts except the lowest amount.
- Take all extra money and pay off the lowest amount.
- When 1st debt is gone take that payment + the payment for the next debt + all extra money and pay of the next debt. Keep doing this until all debt is gone.
This is one debate that will go on for years. High interest first might save you money in the long run but it won’t give you the satisfaction that the Debt Snowball does. The Debt Snowball pays off smaller debts faster so makes you feel better and it gives you more money to pay of the debts.
Example:
Johnny has the following debt
Account Amount Interest Rate Minimum Payment
A $3,000 16% $60
B $2,000 15% $40
C $300 13% $20
D $700 15% $20
Johnny has $250 that he has to use for debt reduction.
By doing the “highest interest rate” first the debts would be listed as A, D, B, C. It would take about 19 months to pay off your debts. It would take you about 10 months to pay of the largest interest rate. After account A is paid off you would only have $310 per month to pay off the next debt. This option would make you think are you getting ahead or not.
If you did the Debt Snowball the debts would be listed as C, D, B, A and it would pay off in about 17 months. After 10 months you would have pay off the 3 smallest amounts and would have $390 per month going to the largest amount. This option would give you satisfaction that you are getting ahead on your debts.
When it comes down to it you just have to do what works for you. I personally did the Debt Snowball and read online that others did it and it works.
Monday, April 27, 2009
Town Hall for Hope
Dave Ramsey on April 23, 2009
Three main thing that Dave said during the town hall was:
1. Get Up and Take Action
2. Stop Listening To Loser Talk
3. Start Giving
Get up and take action. Change is not going to come from the
government. Change will only come from you. You have to
take personal accountability for your mess that YOU made.
You must take control of your money and not let money take
control of you.
Stop listening to loser talk. Turn off the news and stop
listening to people who are negative but instead choose hope
and inject hope into the discussion.
Start giving. Take care of yourself or family first, and then
share with others. Once you take care of yourself and have
your wealth then give to others. Give money or your time.
To find more information check out
www.townhallforhope.com or www.daveramsey.com
Thursday, April 09, 2009
“I came to realize that my money problems, worries, and shortages largely began and ended with the person in my mirror. I realized also that if I could learn to manage the character I shaved with every morning, I would win with money.” – Dave Ramsey
Monday, April 06, 2009
Friday, March 13, 2009
Just wanted to give an update on how I’m doing with my goals.
I have added another $1,000 to my Emergency Fund. – Done 3/13/09
My savings where my Mortgage and Roth IRA come out of is almost at the level I want it at so it will not go below $1,000.
I have some work to do on the Car Fund because of what has happened to the car already this year.
Tuesday, December 30, 2008
FW:
From Money Saver’s Daily Quote
| A paper and pencil budget is a thing of the past. There are many easy, effective ways to manage your personal budget with software. Set up a personal budget with an Excel or Google spreadsheet. There are lots of spreadsheet budget templates ready to download and use. You can also set up and manage a personal budget on websites such as Mint.com, TheBeeHive.org, and BudgetBucks.com. |
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