Debt Snowball
I never held credit card debt month-to-month until Nick and I moved in together. I had student loans but that was it.
I was really good at charging things to rack up points but responsible enough to stay within my means and pay off the balance each month.
Something changed when we moved in together in May 2013. Before that, Nick was living at home in midtown Manhattan and not paying for much. We would treat ourselves to lavish meals and vacations because he had the disposable income to cover it and put money into retirement. I was the lucky recipient!
When we moved in together, we lived in a spacious 3-bedroom apartment on 164th St and Broadway and always had roommates. Having roommates and subletters helped immensely with expenses! The only issue was that our lavish nights out and travel habits stayed the same despite Nick now having expenses. Slowly but surely, some credit card debt was rolling over month-to-month. It wasn’t crazy, though. Totally manageable.
But this is when I started our monthly budget.
As soon as I noticed we weren’t able to hit those full payments each month, I knew we needed to track our spending. We saved every single receipt and counted every single penny for an entire month. At the end of the month we sat down with a budget spreadsheet I downloaded from the internet and plugged in our spending. We were shocked to see where our money was going and how mindless some of our habits were.
The first goal was to set budget in the areas where we were over spending - taxis and meals/nights out were the big ones. We made sure the budget we set was within our means and could include our credit card minimum payments. We were really good at sticking to this. Our credit card debt didn’t grow but it also wasn’t going away.
It was our move abroad in April 2016 that really put us in a hole we couldn’t get out of.
Looking back, our move to Vietnam wasn’t the smartest financial decision. Nick’s salary was not much, about 1/3 of what we made total in NYC. We didn’t think it would be an issue because the cost of living was so low. What we didn’t build in to the equation was travel back to the US to see family. A two-week trip would cost more than his monthly salary and we, unexpectedly, had to do quite a few.
For the first time ever, we found ourselves digging ourselves deeper into debt with no real way to pay it off. Money was a major source of stress for us the entire time we lived in Vietnam. It was also the time I was getting my business off the ground so I wasn’t able to contribute in a super meaningful way. My business was growing but the pure logistics and investment from me personally to open a closed market with doTERRA was a lot.
We put our heads down, did our best to stay within our means, paid our minimums and concentrated on building the careers we loved. Thankfully, all the hard work paid off in the summer of 2018 when Nick was offered a job in Singapore.
I was 6 weeks pregnant so the timing could not have been better.
We reached out to friends who had lived here, crunched numbers and made sure we would be able to live comfortably, afford travel to the US and around Asia and start to pay off our debt. We could! My business was off the ground and starting to grow really quickly, which added to our excitement for the next chapter we were moving into.
Our first year and a half in Singapore was focused on Charlie. I didn’t have medical insurance to cover the birth so that took all our extra money. Charlie’s birth was officially paid off in December 2019 so that is when we sat down and got serious about paying off the rest of our debt.
The Debt Snowball
My main inspiration was Merilee (@easy_budget on Instagram). She and her husband were able to pay off $71,000 in just 2.5 years on a single salary! I started learning from her and was directed to Dave Ramsey and his book “Total Money Makeover.” We got the book and downloaded Merilee’s Debt Snowball Calculator. We picked our month to start, February 2020, and got to work.
So what is a debt snowball? The idea is that you figure out the amount of money you can put towards debt each month, pay the minimums on everything and put all the extra towards your smallest debt. Once that smallest debt is paid off, you then “snowball” the amount towards the next smallest debt and so on.
Our minimums equaled $756/month when we started but we decided we could cut back on spending and put $1650 towards debt per month.
The $756 would go towards:
Singapore credit card minimum ($110)
Amex minimum ($176)
Chase Sapphire minimum ($255)
Nick’s United minimum ($35)
Student loan minimum ($180)
That left us $894 to put towards our smallest debt, which, thankfully, was only about $1000. That card was paid off in two months and all of a sudden that extra $894 we had a month became $929! The next smallest debt was our Singapore credit card. We paid that off in May, so that extra amount per month is now $1039. We can see the snowball growing!
So far we have been able to knock out Nick’s United card, the Singapore credit card and 2/3 of my Amex!! We still have a little ways to go but we have been able to move off our debt free date from April 2022 to December 2021 through extra payments and our stimulus check!
It’s honestly become like a game to me and I get so excited to make the payments and watch the numbers work in our Debt Snowball Spreadsheet. It’s also so freeing to know that in less than 18 months (hopefully much sooner), we will be debt free and able to invest and save! I highly recommend following Jeremy from @personalfinanceclub for investment motivation.
My advice, if you want it, is to just start. It’s an imperfect journey but it is one worth taking.
