So, I read a post last week that kind of peaked my interest. It was "Recession Proof Your Debt Snowball" by Frugal Dad. His twist on the classic Pay Off Your Debts Snowball plan is to pay minimum payments on his credit cards and put the maximum amount in his emergency fund. When he has enough (over his emergency fund base amount) he writes one whole check and pays off the balance in full. I like the idea, I really like the idea - but I am really glad I didn't read it 9 months ago.
I started this whole journey of choosing to get an extra $900 over my regular income per month to avoid foreclosure back in June. If I had seen his post then, I would have been tempted to do the same thing, except I see a few problems I personally might have run into with his plan. The first would have been that I might have dipped into that cash on months I didn't make my goal. I realize that that is part of his point - that if you do have an emergency, you have the cash to cover it, but let's just say my qualification of what an emergency is has changed a lot in 9 months. As it is now, that credit card debt (which was accumulated through my divorce) is under $450.00. (yay!!) I am paying a ton on it in order to get it wiped out so I can use that money towards my other monthly goals instead. I don't know if I would have done nearly so well at eliminating the debt this quickly had I used his plan.
Another problem would have been a concern that one of his commentors had - I might have had a really hard time writing that check even once I hit my goal. Having an emergency fund is so wonderful for my peace of mind, being as my situation changes from month to month based on how much money I can bring in, I might have been tempted to leave it there and not pay off the debt. Not the smartest move perhaps, but one I could see myself doing.
So, I won't be using his plan to pay off my debt. That one card is the only consumer debt I have and my car loan will be paid off about the same time. So once those two things are out of the way, the only debt I will have is my big fat mortgages. However, I can see one or two applications for his plan...
Mainly, I think this would be a fabulous way for me to save up for things I want. I have a couple big home improvement projects that have to happen at home and at the cabin in the woods. I wish I could ignore them because with my financial state, that is really not where I want to put my money, but it is the kind of thing that if I don't fix it soon it is just going to get worse and worse and more and more expensive. If it is possible for me to do them this year, this would be a great way to pay for them without taking on too much debt. I don't know if I can, but stocking away money in the emergency fund is a good thing to do in any case. Even if this doesn't work out for me now, it is certainly something to consider for the future.
You know, I really can't wait for my car and credit card to be paid off. That will be such a relief. Both of those items will drastically effect the $900 number. Although... I still have some big goals. So, even if I could pay my mortgages without working hard to bring in extra income and being frugal on my spending, I don't know that I want to just take the pressure off and coast. Yes, having the weight off my mind will be nice, but until all my goals are met, I am going to keep on pushing. I've got too many things I want to do - too many goals to hit. Just making (or saving) $900 a month won't fund my emergency fund, get the house painted, or get me back in school. Nope, now that I know it can be done, I'm keeping that high target set.
Photo by: wajakemek