Even though our situation has changed greatly since June of 2007 when I started this blog, we have purposely kept many parameters the same in how we deal with our money. For example, we owe less debt because we’ve paid off the credit card. However, we’ve kept the debt minimum payment the same amount in our budget each month that it was before the credit card was paid off, and applied that extra $200 that was going to the credit card each month to my spouse’s student loan. I now consistently earn more money per month than I did in June 2007, but we’ve kept my monthly contribution to the general budget the same as it was in June 2007, and all money above and beyond that goes directly to our snowflake fund to pay off my spouse’s student loan.
We do all this because it is the essence of successfully using the debt snowball and snowflaking together for maximum impact. The snowball picks up speed (and it has!) as other debts are paid off and those minimum payments rolled into a new debt target. Snowflaking works when you consistently collect those snowflakes you earn and apply them to your goal (be it debt, savings, investing, or something else) instead of just letting them melt into the general budget. If you start spending that money in your budget, then you become dependent on it to make your budget.
So, I am trying as hard as I can, and tweaking as much as I can, to keep both these things happening. We base our budget on the original amount we were earning in June 2007, and we keep all extra earnings above that flowing into our snowflaking fund. But, I must admit, it is getting harder to do so. In June, I said one of my reasons for wanting to get out of debt was how tight our budget was and how close our spending vs earning numbers were. We needed breathing room. And although I have, in fact, created that breathing room, I’m not allowing us to use it yet so that we can keep making significant progress. And the reality is, prices on gasoline and food as well as many other things have gone up, and our budget is squealing for mercy. I sat down today to pay bills and balance everything, and after everything is said and done for the beginning of September, we have about a $59 cushion (above minimum projected gas and food expenses) to last until our next paychecks. It should be okay, but it makes me nervous. I went ahead and paid all the snowflakes to the student loan however, because that money becoming part of our budget is a last resort for me. I’m going to have to reevaluate how much money I contribute to our budget by next year though, and we’ll see. I might also have to stop snowflaking my spouse’s last raise.
Here are our current numbers as of today, after paying my minimum student loan payment and applying the minimum plus snowflakes to my spouse’s student loan:
- Debt at start of blog (6/19/07) : $36,451.71
- Current total as of 09/09/08: $15,260.46
- Principal paid to date: $21,191.25
- Broken down into:
- Credit Card: PAID OFF 2/7/08
- Student loan (at 7%): $11,084.68 (paid $144.50 today)
- Spouse student loan (at 9%): $2579.15 (paid $1131.41 today)
- Car loan (at 4%): $1596.63
- NCN Network Chart percentage of debt paid: 58.14%
The spouse student loan payment was $437.59 budgeted minimum plus $693.82 snowflake amount that included all my earnings from the end of last month and the beginning of this one, minus the $500 I contribute to the budget every month. I earned less from tutoring because it was summer, so hopefully I can bump that number up a little this month. We have past the $20,000 mark of debt paid off! I do not think that we will be able to pay off the student loan by October like I was originally hoping, but we are on track to definitely have it paid off by the end of the year.
On to next week – I’ll pay the car payment and knock the debt down a little bit more. Is your budget squealing? Good luck with handling the pinch!