- Save $1000 fast for an Emergency Fund
- Payoff all debt using the Debt Snowball
- Save 3-6 months worth of expenses as a fully funded Emergency Fund
- Invest 15% of income in retirement savings
- Save a college fund for your kids
- Pay off mortgage early
- Build wealth for fun, for investing and for giving away
We’ve already done the first step, and prior to starting the TMMO, we’ve already finished part of step 2. The average person takes 2 years to complete step two, but I am hopeful that it won’t take us nearly as long.
The Debt Snowball is basically where Dave gets you to list all of your debts with the lowest amount first and the highest debt last (before you can begin your debt snowball, you need to be current on all your bills – making sure that you’re not in arrears for anything). Don’t think about interest rates, when the item is going to be paid in full (ie. end date for the loan), etc. You don’t list your mortgage here. The reason that you do this from smallest debt owing to largest, is that most people will gain momentum when you get a “win”, when you pay off one debt. Once you have one paid off, you will feel excited about paying the next off, and the next after that. I know that every time I’ve closed an account or paid off a debt I feel like running around the neighbourhood yelling “FREEDOM!!!” at the top of my lungs.
So, how do you free up money to pay off your debts? We’ve done it by cutting our food budget (a lot of money from the “eating out” portion), stopping our RESP savings (if we aren’t paying on our car, we’ll have more money to invest), selling the second car that we never use, and moving to a cash budget system. This way we’re less likely to say “Ok, I’ll buy that tub of gourmet ice cream” because we know just how much we have to spend on groceries… and truthfully? We can’t afford it right now. Not if we want to be debt free!
There are a lot more ways to kickstart a debt snowball. You could sell a car, have a garage sale, or pick up a part-time job.
We still have some work to do. We’re actually not entirely sure how much we’re still owing on our car to find out exactly when the payments will end (and how much we have to save to pay it completely and such). I am extremely excited to not have to worry about this any more and to move on to the next step. I am hoping that we will continue our momentum right into the savings portion, and on into step six.
Yesterday I went grocery shopping with $100 for this week’s food (yes, it’s only a partial week). I got all our food for the week, stuff for Kitten’s birthday party, and a few extras (a towel and shampoo/conditioner that were on sale) for under $70. I was so impressed with myself. I finally felt like the master over my money. It’s a feeling that I really want to continue.