Tag Archives: debt snowball

How to Negotiate and Pay Your Debts Off Faster

Are you frustrated with your debt and feel like you’re stuck in this rut? Today we’re going to see how you can negotiate your debts to lessen the stress and get you closer to your debt free goals!

Paying Off Your Debts and Dealing with Debt Collectors

Usually when people make money goals for the year, paying off debt is in the top three but many struggle to achieve that goal.

Depending on where the pandemic caught you on your financial journey, you may have had an extra struggle. Perhaps a drop in income meant slowing down or even pausing your debt payoff plan.

That can be a real and huge burden because those balances are lingering or worse, growing. If it makes you feel any better, you're not alone. Debt is weighing down on a lot of families.

According to Experian, 90% of adults in the US have at least one credit card on their report And of those 75% carry a balance month to month. The average balance for that group is over $5,000.

The average balance on a car loan is $19,700. And Then you have student loans. In 2020, the average balance was $38,000. While there is some relief for federal loans, with the pause in payments, if you have private loans, you're still dealing with them on top of everything.

Hopefully things have improved in stabilize but now you're at the point where you're trying to figure out how to jump back, in which debts to tackle first, and what payment plan makes the most sense for you.

Which is why I'm happy to have attorney Taylor Kosla be a part of this episode.

Taylor is a partner at Agruss Law Firm, a team that's focused on helping people deal with debt collection.

In this episode, we're going to look at:

  • ways to negotiate with your creditors,
  • protections available to you through the fair debt collections act, and
  • a possible opportunity for you to have an attorney assist you without you paying out of pocket.

Are you ready? Let's get started!

Handy Tools to Pay Your Debt Off Faster

Thank You to Our Sponsor Coastal!

Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today.

We’ve been Coastal members for a few years have been happy with their services.

They have wonderful services and accounts to make saving easier including their competitive money market accounts!

As I mentioned in the episode, if you're a Coastal member and are thinking of consolidating your debts, check out Coastal's options to refinance!

Debt Negotiation

Elle Martinez: Let's start off with the best case scenario. Your finances have stabilized and you're now ready to get back into your debt free plan. Perhaps you've kept payments, but it was the minimum or maybe little less than that. So the balance has grown or you've had to pause your payments while taking care of more essential bills.

So now you're ready to get back into the swing of things. But you're wondering. How can you approach this?

Attorney Taylor Kosla walked me through a few key steps with negotiation that you can use to work with your debts and make them more manageable.

The first is be proactive and reach out. You have to resist that instinct of avoiding and ignoring calls which is difficult, especially if you were dealing with financially tough times.

Something that you want to consider though, is that because so many people have been financially affected by the pandemic, creditors may be more eager to work with you then you expect.

Taylor Kosla: I'd like to start off by saying the biggest advice I give to our clients and just about everyone I meet is if you have debt, don't ignore it.

Based on my experience debt collectors creditors, they'd rather get something rather than nothing.

Elle Martinez: The second point is verify the debt. Before you send any money over, verify the numbers.

This could be a situation where your original debt has been sold to another company. Sometimes they don't have correct information on the accounts. So you want to make sure that that balance is accurate.

Taylor Kosla: People that have debt, especially post COVID, they're getting hit with their behind them auto bills, credit card bills, medical bills, especially with COVID.

It can be an overwhelming experience. So you'll want to negotiate the debts down, but you also want to be well-informed of what your debts are.

What are the balances? What amounts are due? How old is this debt? I think now is the time because the debt collection industry is booming, that collectors are probably going to try and sneak in some of those old debts.

If you make a payment on an old debt, that'll actually revive, the statute of limitations. Do your homework know what the accounts are, and you can ask a collector, ‘I want you to verify this account for me', and they should send you documentation showing, what they're collecting on when the account was open, when it was charged off, what the balance is, and what fees or interest has been incurred ever since.

Elle Martinez: Third, run the numbers yourself. When you're working with creditors and debt collectors, they're going to try to get you to commit to a higher payment. That's their job. But you're the one that has to live with this so go through your budget and work out the numbers beforehand.

You should consider both what you can afford on a monthly basis and as Taylor points out a one-time payment to settle it.

Taylor Kosla: You should negotiate your debt on and you need to be honest with the collector. Collection agencies get more upset, if you commit to something that you can't maintain so be reasonable.

I think 99.9% of consumers with debt, they want to pay it off. Often times either with a payment plan or a lump sum payment. Debt collectors and creditors really like a lump sum payment.

They're oftentimes willing to shave off decent amount in order to get that money in their pocket, because the longer that debt sits out there longer that you wait to start making payments to get that resolved, the more fees and interests are getting tacked on it.

That balance just keeps going up and up and it's going to be a lot harder for you to dig out of it.

Elle Martinez: If you are able to come to an agreement, make sure that you have it in writing. You want the terms to be clear and to make sure that they honor that agreement.

Now if they aren't willing to work with you on a sustainable payment plan. You do have a few more options. You can work through your own debt payoff plan, whether it's using a method like the debt, snowball, avalanche, or lasso. I have entire episodes that walk you through the details and one this year about how to find the best solution for your situation.

Another route that you may want to take is consolidating and refinancing your debts. Some families have found it to be a very helpful option because they can take multiple high interest loans and merge it into one that's at a lower, more manageable rate.

If you're happy with your current bank or credit union, reach out to them first. See what they have to offer, but then also shop around. You want to make sure that you're getting a competitive rate.

If you are a member of coastal credit union here in the triangle area, I'm going to include a link in the show notes to make it easier for you to find that page and reach out to them.

Hopefully you can take this information and use it to come up with a payment plan that you feel comfortable with but if you're dealing with an aggressive debt collector, That's beginning to harass you We're going to go over some ways that you can protect yourself and what rights you have.

How the Fair Debt Collection Practices Act Can Protect You

Elle Martinez: Debt cannot only financially squeeze people but when the collectors start harassing you it can be emotionally stressful as well. In some cases, it crosses the line and becomes abusive. That's where the fair debt collection practices act comes in.

The purpose of the FD CPA is to help give you some protections and limit abusive debt collectors.

Your credit cards, medical debts, and consumer debts like your mortgage or car loans are covered under this.

We'll get into how it can protect you from creditors that are harassing you, but it can also help you with your credit report.

Taylor Kosla: a good way to keep track of your accounts and what's going on with your credit is regular check your credit report. By federal law you're entitled to a free copy of your credit every 12 months.

I recommend going to annual credit report.com and go through that report line by line to see if there's something inaccurate, especially with medical debt.

I see a lot times consumers have health insurance that should have paid a bill, or maybe the insurance company paid the hospital bill, but they didn't pay the physicians bill that was associated with the hospital.

Those bill slipped through the cracks. They ended up on your credit report, that collectors are coming after you now for it. You want to keep ahead of that stuff by checking your credit report.

My firm handles fair credit reporting act cases, which allows us to help consumers get an inaccurate information removed from their credit report.

There's a dispute process to request, a negative and or inaccurate information be taken off your credit report. If the bureaus don't fix it after that, you can file suit.

Elle Martinez: Now here's where it can help you with a collector or creditor that is harassing you under the FD CPA, that collector can't contact you at unreasonable hours. Either before 8:00 AM or after 9:00 PM, unless you agree to it.

They can't contact your work. If you inform them, they're not allowed to.

And they can't contact you. If you have already have informed them that you hired an attorney. Plus they can't discuss your debt with anyone except you, your spouse or attorney.

If you're thinking, okay, I'm in debt. I don't have money to hire an attorney. Taylor has some good news for you.

Taylor Kosla: One of the great things about that law and the debt collection is there's, what's called a fee shift provision.

So consumers don't actually have to pay my attorney's fees. The bureaus and the debt collectors do.

on top of that, you're entitled to statute for damages, which are between zero and a thousand dollars and actual damages.

If something was inaccurate on your credit and you were denied an auto loan, or maybe you got a higher interest rate on a loan on that actual money out of pocket as a result of the inaccuracy is something that you can claim under the statute.

The debt collection act, which is a protection for consumers being harassed by debt collectors.

It also is a fee shift provision. It's great because again, our clients can reach out to us and we can help them at no cost to them. They're entitled to statutory damage between zero and a thousand. Now.

Actual damages for a debt collection case usually occurs when a debt collector threatening to file suit, or they're making these empty threats that they don't intend to take.

That consumer then pays them $500 because they're afraid of getting sued. That's actual damages, money that they spent based on the false representations made by the collector.

Elle Martinez: These are just a few of the big provisions that this act has that can cover you when you're dealing with creditors that are harassing you. And if you want to learn more about the services that Taylor's firm offers, just go to agrusslawfirm.com.

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Finding the Best Debt Free Plan For Your Family, Budget, and Timeline

Dealing with debt can be a grind, especially if you have a ton of debt or if it is high interest.

Today we’re going to see how the debt lasso method can speed things up with credit card debts and we’ll get tips on how to pay off over six figures of debt without sacrificing fun!

Creating a Plan to Pay Off Your Debts

One of the most popular goals families make when it comes to money is paying off their debts and with good reason. 

Even before the pandemic, debts were a considerable chunk of an average American family’s budget. 

The median household consumer debt was $67,000 according to data in New York Fed’s quarterly Household Debt and Credit Survey.

Getting rid of that debt is not always so easy. 

You need something that is realistic so you can stick with it as well as a way to speed things up if you’re deep in debt. 

We’re going to look at how you can create a debt free plan that fits your family and budget. 

Today’s financial experts are John and David Auten-Schneider and Toni Husbands. 

In this episode we get into:

  • Deciding which plan would work best
  • Getting your spouse on board
  • finding that balance between hitting your financial goals still enjoying your life

Let’s get started!

Listen to the episode on Apple PodcastsSpotifyAndroid, or on your favorite podcast platform.

Resources to Dump Your Debt Faster

If you’re looking to create a debt free plan that fits your family, budget, and timeline here are some helpful resources to review. 

If you’d like to chat more about your money system, please join us in our private and free Facebook group – Thriving Families

We’re families looking to support and help one another out.

Hope to see you there!

Thank You to Our Sponsor Coastal Credit Union!

Support for this podcast comes from Coastal Credit Union. If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today!

We’ve been members for years and love their service and competitive rates on checking and savings accounts!

Using the Debt Lasso to Pay Off $50,000 of Credit Card Debt

Carrying a ton of debt can be tough. When it’s credit cards, it’s especially frustrating.

What makes credit card debt so challenging is the high-interest rate. Even if you’re paying each month, it doesn’t seem like it’s making much of an impact.

It can almost feel like being stuck in quicksand. You’re sinking debt into debt and you’re just drained.

Two of the most popular methods for paying off debt are the debt snowball and avalanche, but if you’re dealing with several cards and they all have a high interest rate, then you may want to try the debt lasso

John and David Auten-Schneider created this method to knock out over $50,000 of credit card debt. They’re also the creators of Debt Free Guys. I spoke with them about the process behind the debt lasso. 

Dealing with Credit Card Debt

Elle: David, John, thank you for joining me today. I’m really excited to talk to you guys about a goal that kind of transformed my husband and my trajectory with our families and opening up options, but I’m sure also has done the same for you, which is paying off debt, especially when we’re talking about high-interest debt.

John: Thank you for having us.

Elle: Every year Fidelity releases, their money resolutions [survey] and paying off debt is usually in the top three.

The frustrating part is it seems like you start off good. You’re motivated. And then by the end of the year, you’re like, I really didn’t make any progress.

I think a big part of this is not finding a system that works for you.

John: Absolutely. Absolutely.

David: Yeah. It’s interesting. That was one of the things that John and I at the very beginning, realized that if we didn’t have something that would work for us, it wouldn’t last.

Because we knew it was going to take us several years to pay off our debt, we knew that we needed to figure out something and get into a groove that that would propel us forward and keep us motivated to keep going.

Elle: It’s interesting. You’re saying you knew that it was going to take years. We have a mutual friend, Michelle Jackson, and she recently had put a great post about personal finance unicorns, where not everybody pays off their debt in a year and a half.

They don’t knock out $60,000 in a year. It’s usually a process [such as your own situation].

So you guys came up with something different. Two of the biggest methods are the debt snowball and the debt avalanche, but you guys forge your own path with the debt lasso.

I wanted to talk to you about that. Why did you create that method and how does that work?

Escaping $50,000+ of Credit Card Debt

John: Yeah, absolutely. So well, so our story is, is that we sort of, at some point just profoundly discovered that we had $51,000 worth of credit card debt.

We got into a panic and a funk and depression, and after we came out of that, we came out of it committed to paying it off.

We started to look at the options that were available at the time to pay that off. We stumbled upon the snowball and the avalanche method and fortunately, my husband’s really good at math.

He crunched the numbers and he’d estimated that it was going to take us like four to six years to pay off our debt with either method and that was just deflating. Like I don’t have that kind of patience.

It just seemed too hard. In our minds, we thought that the faster we could pay off the debt, the more likely we were going to achieve our goal of becoming debt-free.

Our background actually is in finance. So we were helping other people with their money and telling them how to save and invest. We weren’t doing that ourselves, like the cobbler’s kids and their shoes.

David looked at the numbers and we thought, well, what is inhibiting us from being able to pay off our debt faster with either of those methods,

David: – besides our bad spending habits

John: besides our bad spending habits. And it was the high-interest rate that was whether it was the snowball or the avalanche method. It was that high-interest rate.

Tackling the High-Interest Rates

At the time we were paying anywhere between 15 and 20%, that was slowing us down. So we asked the question – how can we make that go to zero?

Is there a way to make that completely go away? We started to do some research and we found out that there are actually zero interest balance transfer credit cards.

And we thought, well, is this an option for us to maybe do some consolidation and to pay off our debt faster?

The next problem was those balance transfer fees, so they’re not well, does that make actually make sense?

We actually found out with our particular situation, it did actually make sense to pay those transfer fees, especially if you can find the 12 to 18 month terms that the zero interest rates would last.

We thought, well, geez, we can just eliminate that. And that actually helped us. We had estimated we pay off our credit card debt in three years.

We were really committed and aggressive with it and we ended up paying it off in two and a half years.

Elle: There’s a couple of things I wanted to talk to you about that because you guys use balance transfer.

Again, high-interest debt. I can totally understand wanting to lower it, but for some people that advocate for the debt snowball or debt avalanche, they kind of want you to completely avoid credit cards.

So how do you resist the temptation of relying or getting back into the credit card habit while you’re moving and you’re opening these accounts?

John: Yeah, of course.

How the Debt Lasso Works

David: So the debt lasso method is more than just a balance transfer or refinancing of your debt. There are actually five pieces to it.

Those five pieces are the things that help you with that whole process.

The very first step is to commit and you have to commit to not adding more balanced to your credit cards.

There’s a number of ways to do that, but that’s the first thing you have to commit to doing. If you don’t commit to doing that, you’ll never pay your debt off.

The second is to commit to a specific amount every single month that you’re going to pay towards your credit cards.

And that amount must be well above your minimum payments. That way you are actually making progress because you’re paying a bigger chunk.

So that’s the first step is making that commitment. The second step is similar to the debt snowball. You want to go out there and you want to look. In this amount that I committed to paying every month, can I knock out a credit card or two in that first month or two?

Do I have a credit card that has a really low balance, a knock those out and that way you get a little boost right at the very beginning?

John Schneider: Step three is the actual debt lasso method where you try to ideally lower your interest rate down to zero, but that option is not available to everyone.

So the lower, you can lower your interest rate the better into as, few locations as possible, which is why we call it the debt lasso.

The fourth step is to automate the entire process. You’re committing to a specific amount that you’re going to pay towards your credit card each month.

You can put that in your bill pay system so it goes out automatically , that eliminates the risk that you won’t make a payment. Or you’ll rationalize away making the amount that you commit to in step one.

Then number five is to monitor. You want to make sure that even though everything’s sort of on automation. You want to just make sure everything’s running smoothly and you’re not missing any payments.

When you do pay off any card, then you rolled that additional payment that was going towards that card to the next card.

And that’s that entire five-step process that helps folks pay off their debt as quickly as possible.

Finding Money in your Budget to Pay Off Your Debt

Elle: Wow. I love how you guys start off with the commitment because it does take a significant change.

Of course, one of the biggest things is the money has to come from somewhere.

Realistically, initially, it’s going to be from your budget. I mean, hopefully you’re earning extra income.

For you, what changes did you have to make with your budget? Where was it coming from with your first part of this debt lasso of those payments? Which one was the hardest and which one was the easiest changes to make?

John: Absolutely. Actually, the very first step that, that we took when we came out of our funk of having so much credit card debt was that David methodically and meticulously went through every expense of ours for the previous 12 months.

He grabbed all our account statements, all our credit cards, checking everything that he could find, any itemize, every expense that we had.

It really blew us away when we did that spending analysis is what we call it. Because had you asked us prior to this analysis, what the quality of our life was? We would have said, you know, it’s okay. But when we looked at our spending, it blew us away. We were living like rockstars on, you know, a bartender budget.

You know, we were just living way beyond our means, but we were traveling well, we were eating and dining. Well, we were drinking well, we had some really nice bottles of wine. It just blew us away.

We realized that if we could reign in our spending is especially in a few particular categories that would help us save a significant amount of money.

So were able to reign in our spending in those particular areas. Probably the number one win that we had – and this is likely the case for most people, most Americans – was that we reigned in our grocery spending in our dining spending dining out spending.

There were some weeks that we were spending $400 a week at the grocery store and $400 dining out. And

David: – for two men –

John: $800. That’s just two men in our thirties. We have never been skinnier. So I’m not sure what we’re doing wrong now, but nobody needs to eat like that.

We were able to lower that and we saved about $30,000 a year by becoming super meticulous with our grocery shopping and reigning in our dining out.

The other thing that we did, and this was the most challenging to answer your question was we were very, very, very social creatures.

We were constantly going out to happy hours and parties and clubbing and to bars and whatnot with our friends who were traveling a lot, most often on credit cards.

So that was the hardest part for us, but we were able to reign that in and we tell people we didn’t stop going out to your point earlier. Cause we. We knew we were social creatures.

We couldn’t just cut cold turkey, but we stopped going out as frequently. And that, that not going out as frequently, also freed up some more money that we could put towards expedite paying off our credit card debt.

So that combination, as well as eliminating our high interest rates really helped fuel paying off our credit card debt. And that’s how we got that paid off in two and a half years.

Paying Off Debt While Still Enjoying Now

Elle: Yeah, that is fantastic. Congratulations because first of all, $50,000 of any kind of debt is a huge one, but credit card debt, which for so many people can sink them to get over.

That is incredible. But I do want to talk about this just a little bit more before we wrap things up. With personal finance, I found for us and for a lot of couples is finding something that’s sustainable. Right?

We’ve talked about this before we hit record of diets and finances going all drastic and yeah.

The big stories are usually these drastic stories that get the headlines. But if you, you want to hit your goals, you have to have something that’s sustainable.

How did you guys strike that balance of paying off debt, which is a good goal to have, but still living and enjoying your life?

David: Yeah. So I think for us one of the biggest, I think issues that folks have today is that people don’t feel like they can have a fabulous life and less they’re in some way, showing everyone else that they’re living a fabulous life.

The easiest way to do that is by your experiences in the past, it used to be things. I think to some degree it is still things, but we’re seeing this shift towards people blowing their budgets and their fi financial future on experiences versus things.

What we realized is that we did have to have something sustainable. One of the things that we came up with is our fabulous life calendar, which is a part of our fabulous life combo you can get it debt free, guys.com.

The idea with that is that we knew that we still wanted to have a great quality of life. Every single month we wanted to be doing fun things and being out with our friends and doing all that.

We knew that if we didn’t fill the calendar up with things that were either free or lower costs that we still really enjoy doing, then we would be susceptible to dropping a hundred, $150 on brunch and day drinking on a Sunday with our friends or having a happy hour that was supposed to be two beers, turned into something that is way longer than a happy hour.

You know, you can do happy hour, then you have appetizers then you have dinner. That kind of thing was what was wrecking us financially. We knew that we needed to fill our calendar up with the great quality of life fund things that we could keep control of the costs of.

And that is what allowed us to feel like we were living fabulous while we’re still paying off our debt and how we have since then had this fabulous, not fabulously broke life because we still focus our a lot of our time and energy on things that are within our budgetary control, which allows us then to focus our money on growth, on investing on enjoying the things that we really want to enjoy instead of things that are kind of disappear quickly after you’ve spent the money.

Elle: I think you’ve hit a lot of good points. It isn’t about deprivation. Yes. You do have to cut out your budget, but you shouldn’t, you should still have joy in your life.

So you mentioned your pay off debt course. Do you mind giving a little more details?

David: So the credit card pay off plan is basically a distillation of what we did over those three roughly three years to learn what we needed to do to get ourselves to where we could pay of debt off and then start paying it off.

So it really comes down to the first set. Is it is all around your mindset. How do I change my mindset to focus on what’s important?

The second, is that the whole idea of how do I reduce my interest and get myself ready to really start paying my debt off?

The third step is how do I create a budget that really works for me? We define our budget as dynamic and focused on happiness. And a lot of people hate the word budget because they don’t focus on what makes them happy when they’re budgeting. They focus on all the other stuff. That piece there, we also kind of loop in this idea of, how can I make more money?

There are some easier ways, not necessarily easy, but there are some easier ways to make a little bit more money to help you pay off your debt faster.

Finally, the thing that most folks don’t have is how do we create a plan with them all of that; that will work for the time period that it will take for me to pay off my debt?

That’s kind of all encapsulated in this course. We have a supplemental piece to that, that our folks who meet with us every Thursday night, we do, I’m sorry, Tuesday nights, we do a group session. They call it financial therapy because we’re constantly talking about wins and challenges and how everyone can contribute to this idea as a group, people are moving through paying their debt off.

John: So you can find information about the credit card pay off plan at debtfreeguys.com.

But if you want to get an idea of how the debt last one method might work for you and how it might work relative to the snowball, the avalanche method, you can also go to debt-free guys.com or go to debtlasso.com to download a free copy of the debt lasso calculator.

Paying Off $100K of Debt (without Feeling Deprived)

Let’s be clear – getting out from under a ton of debt doesn’t happen overnight. You need a plan and a system to get you free. 

One of the challenges families face is when one or both of you are reluctant to get it done because you feel like you’re going to sacrifice having fun for the next few years. 

It doesn’t have to be that way.

Toni Husbands, the creator of Debt Free Divas and the author of The Great Debt Dump shares what helped her family pay off $100,000 of debt while still enjoying life in her city of Chicago. 

Digging Out from a Mountain of Debt

Elle Martinez: With everything that happened in 2020, and then what this is the first week of 2021 is very eventful as well. The idea of financial security and getting your footing is on the minds of a lot of family.

Specifically one of those goals, as you know, I’m sick and tired of the debt we have and getting rid of them.

I want to jump in with that. Cause you and your husband, Colin paid off a considerable amount of debt. It was over a hundred thousand, right?

Toni Husbands: $107,000 in debt, consumer debt. I was like to remind, so that did not include a house. It took us seven years to do that.

Elle Martinez: Wow. I’m glad you share that information.

Cause I know sometimes I enjoy reading those articles, but you do after a while, get tired of seeing like I’ve paid off a hundred thousand dollars of debt in two years, or these dramatic stories, but many families the story is we came up with a plan and it took some time, but we got there.

First of all, I want to talk to you about how you paid off your debt. You use the debt snowball method, right?

How the Debt Snowball Works

Toni Husbands: I did and that was popularized by a Dave Ramsey, uncle Dave as I like to refer to him.

He’s a little shorter for some people, but I can across his book in 2005 at a conference that I was attending with my mom, he was speaking there at that time.

And his book, the total money makeover. So I read his book and that’s where I became aware of the concept of the debt snowball.

Just to explain it real quick, the debt snowball is basically a process where you list your debts in order of smallest to largest. You focus all of your available cash and pay your minimum on everything, but you focus all of your available cash on the smallest debt on your list.

And the purpose of that is that so that you can achieve quick wins.

Elle Martinez: Gotcha.

Toni Husbands: So you pay that one off and then you go down to the next smallest, once you’re finished with that. Basically the amount of money that you’re using to retire debt grows or snowballs.

As you start to take things off on your list, that snowball grows and you develop momentum and that’s kind of what carries you on through the process.

Why the Debt Snowball Works

Elle Martinez: Okay, so you read this. What about it clicked for you and when you were paying off your debt? Did you make any adjustments to fit your family and your goals?

Toni Husbands: Before I came across Dave Ramsey, we probably were working on this process for some time. I had read other books, are there. There are a lot of different processes, a lot of different approaches.

I known about Suze Orman. I read about the automatic millionaire. Like I was intentional about trying to work on this problem.

At that time, we didn’t even have that much that we, well, I shouldn’t say that much. We had maybe about 40, 45,000 at the time, you know?

When I came across Dave Ramsey, that’s when I had quit my job because we, although we had the debt, we were able to make the payments.

I think that was always our financial philosophy. Can we make the payment? Right?

Elle Martinez: I’ve been there.

Toni Husbands: We can make the payment. We can afford it. Right. Regardless, not looking at the total bill, but before we would, we would try different things.

We were both engineers and so we would create these like really magnificent spreadsheets with all of these colors and bells and whistles.

Then we would like put it on our, putting it in a folder somewhere and not look at it for three months, you know?

Probably two things that happened when I read Dave Ramsey, number one, we had to make a change because a third of our income was mine because I had left my job. We were starting the laundromat. So a third of our income just left and we had to be more intentional and more careful about how we were using our money.

On top of that, I think at this point, just wrote down everything that we had them start to look at it on paper. That was the big thing for me. It’s like looking at it on paper.

I stopped with the spreadsheets. I just would write down everything, put it on my refrigerator and have it there in black and white.

We would look at it every day. We would have discussions about it, we would argue about it, but it was on the top of our mind. It was in the forefront of our mind.

It was something that we paid attention to constantly. I think that’s one of the biggest things that really helped me to stay focused and not just come up with these fancy spreadsheets, Pat ourselves on the back. ‘Yeah, that was good’ and then just not, you know, then kind of go back to our regularly scheduled, you know, and not in that, you know, continue to work on what we needed to work on. That was the big thing for me is like posting it somewhere where it was visible. Daily.

Elle Martinez: Yeah. I love what you bring out because I think that’s not addressed enough, which is how do you find a sustainable plan that already is aligned with really who you are and what you want to accomplish?

Because You could have the perfect template for paying off debt or budgets, but if it’s not you, or it’s not close enough to you, you’re just not going to keep it.

I have that same idea when we talk about like money management apps. People always ask me, well, what’s the best one?

I was like, it’s the one that you can actually keep. There’s so many different options there. I might have a personal favorite, but what works for me, isn’t going to work for someone else in their family. But with that, you have to come up with a plan to tackle it.

Finding Money to Pay Off Your Debt Faster

A big part of that is finding money within your budget. Again, this is something that’s very personal because initially at least it’s going to come out of your budget somehow.

For you guys, Where did that money come from? What was the hardest part that you had to change or adjust and what was the easiest one?

Toni Husbands: That’s a great question. I will tell you that the hardest part wasn’t actually the money part. It was the I would say mentality part because I wanted my husband to make all the changes. So I was like, ‘if you stop doing this and if you stop doing this’, and can make progress, right?

Elle Martinez: Yeah.

Toni Husbands: I didn’t need the cable, you know, you watch them mob package or whatever , so we cut that out. We’ll be good. Right?

That was interesting too, because he was just like, no, and I will tell you too. He was not, he thought Dave Ramsey probably still does is a coop. He was, he was like, he’s just trying to sell books.

He’s very like analytical and critical. That’s the engineering brain so getting him on board was hard, honestly. And it was good. I can say we, we, we debated, we had a lot of intense fellowship, right?

Elle Martinez: That’s a nice way to phrase it.

Toni Husbands: We had a lot of discussions and honestly, I had to stop thinking about what he could do and what I could do in a way that didn’t affect him.

There were things I do in my own hair, right? I started now that’s a big one, especially in the African American community. We spent money on our hair.

I took to YouTube, you know hairstylists since, you know, I figured out how to do a lot of things at home and stretch the amount of time that I would go to a salon, you know, once a month or getting my hair braided all the time. Like figuring out how to do those things myself. Now I might not have looked like I just stepped out of a salon, but I was paying debt off.

Elle Martinez: You got to find that balance. Yeah. I got schooled by friends. I’m like, what? You just go to Supercuts, you get your hair done it cheap, you know? And they’re like, no, not for us. but again, that’s personal because in every situation, first of all, it’s what matters to you, what matters most.

Everybody’s going to be different, but for you to make that sacrifice and find ways to still fit that personal care in with your budget while still dumping the debt is really key.

Slashing Food Bills

Toni Husbands: Another one is cooking. You would think that would be an easy one, but I hate to cook.

I shouldn’t say hate, but I don’t enjoy the cooking experience. How about that? We lived at the time we lived downtown and a very cool little swanky neighborhood, lots of restaurants. And so we was just my husband and I, we would, you know, you can walk outside and go to this restaurant, go to this restaurant.

My husband loves to eat. I’m not that big on cooking. And if I didn’t go, if I didn’t cook, we would just go out or order in or something like that. We had a lot of options.

We were able to save so much money by going to the first of all, switching the grocery store that we went to. We stopped shopping in our little swanky neighborhood.

We found Aldi. That was a huge, at that point I was tracking it at 30% savings by doing nothing else but switching grocery stores.

I’m not a couponer or I don’t clip, but you know, you have to do things that you can do that, you can be consistent about. I got over my grocery store snobbiness.

We thought I’ll be 30% savings and food just right there. Cooking out how long save so much money over, going out to restaurants also better on your waistline to just, you know, just a side note.

Those are things that I had to kind of train myself and it wasn’t, obviously it’s not something that I didn’t get tired or we didn’t go back out, but we budgeted a date night or outside time, you know, smaller things, but not every day of the week.

Six days a week, we were cooking, we were eating inside. My husband doesn’t care where he eats. As long as there was food in the house, he would eat now.

That was a way to make a change without, without forcing something that I wanted on him when he wasn’t ready. I will say it probably took him about a year, about a year to actually kind of come on board.

When he started see like, Oh, we got rid of the first debt was $450 and that win being able to scratch that off was such a boost of momentum.

We were able to pay that one off and then the next one, and I would actually leave them up; checked off X off on my little sheet that I would print out every month.

We can start to see the progress that we were making and that was a source of encouragement and momentum.

Then he starts to kind of come around and like, okay, we can do then he volunteers to make changes on his own.

He’s not being told I’m not his mother. Right. That was kind of the biggest, the hardest thing for me is like, this is a grown man, a fully functional adult, you know, he’s going to make decisions.

Dave Ramsey, he has a saying those convinced against their will or have the same opinion still. Basically you can’t make people do.

As he sees that I’m sticking to this, that we’re making progress, he comes around and so now we’re arguing about what we’re going to cut versus about doing it or not doing it.

Elle Martinez: Improvements you get those steps you moving forward.

Toni Husbands: Right. I was like, ‘yay’ behind his back, but that’s okay. We’ll argue about what you want to cut next. That’s fine. Again, it took about a year to get to that point, but it was like continuous progress on my part in the ways and the things that I could do to show that I was serious about this.

Hitting Your Money Goals (While Still Enjoying Life)

Elle Martinez: Totally makes sense. There’s so many good points I want to get into, but I do want to focus in on your husband, Colin, and you had different approaches.

I think we’ve talked about this before, where he didn’t want to be deprived. That was one of the concerns, going debt free.

So how did you balance hitting that goal, becoming debt-free while still enjoying your life, because you have two kids. That time it doesn’t come back.

Toni Husbands: Right. Yeah. One of the things that we definitely loved to and still love to do is travel.

What we would do is if we just, we wanted to go somewhere or something came up, you know, where there was a trip involved. We would just pause our debt, snowball. Okay. We decided we would pay cash for everything. So we would know we were no longer charging plane tickets and hotels and things like that. We would pay cash for it.

We still traveled throughout this. So that could possibly be why it took so long. So we would pause our debt snowball. We will go on our trip. We would enjoy ourselves. We would come home with no strings attached.

Okay. No bills following us. Then we wouldn’t get back into the debt snowball after. We travel quite a bit, even now with two kids, we still, you know, pre COVID. We still two, three times a year small mini trips.

We take a lot of mini trips, but we have family in different parts of the country.

And then of course I just like to explore periods. So that’s one of the big things that we would definitely do. We started to become tourists in our own city. There are a lot of fabulous things.

You’ve done this before. You’ve done the $20 [date night] challenge. Things like that.

We started to like really get into either low cost or free things. You hear a lot of the bad stuff about Chicago, but it’s a very fabulous place to live. It’s there’s a lot to the cities. There’s a lot of great entertainment, you know, like live music and downtown, the taste is free.

There’s a lot of, especially during the summertime, a lot of things that you can do if you research and find things and pay attention. I was intentional about that type of thing too.

We have the festivals, the here, there, everywhere, dancing in the park, the free movies we would do all of that.

Yeah. Honestly, we still do. We still do things that are either very, that you pay for parking pretty much, or you can jump on the lesson, get there. We do that now with our kids .

We really have a pretty full dance card if you will, without spending a lot of money. The libraries have a lot of interesting speakers, the universities have a lot of very interesting things like plays that are, you know, five or $10.

We really had a very enriching experience and didn’t spend a lot of money.

Getting the Most Out of Living in an Expensive City

Elle Martinez: Yeah. I, I love that. We are fans of the library too. I mean, besides picking up books, there’s Storytime, there are crafts.

Now because of COVID, we can’t go inside our community library, but what they did is they did like a Storytime walk around cause it’s by a park, to get the kids engaged.

What I liked about your story is. A lot of people assume like ‘I live in a high cost of living area’, so I can’t do this. We almost put hurdles ahead before you even get started, but it does take effort, not going to lie.

Toni Husbands: Yes. It takes research and, and your taxes are paying for it. So I might as well.

Elle Martinez: You bring up a lot of good points. I know we scratched the surface, Toni. I’m definitely going to have to have you back on again and, you know, chat with you because.

You’ve already like got me thinking about so many different ideas, but for those that are interested in learning more about you, where’s the best way they can reach out?

Toni Husbands: So you can reach out to me through my website, Debt Free Divas.

I’m also on FacebookTwitter now, Instagram.

I’d love to talk with you, connect with you get you involved in the community of like-minded debt dumpers and support your journey!

Key Takeaways on Becoming Debt Free Faster

This month’s money challenge of tracking your finances really lines itself up well, With today’s episode all about paying off your debt.

Seeing the numbers in front of you gives you a clear idea of first of all, how much debt you are looking to pay off and how much room in your budget, you have to hit that goal.

Your next challenge. though maybe deciding which debt payoff method is right for you and your family.

While the debt snowball, avalanche and lasso may have slightly different ways of tackling your debts. There are some key points to them that make them successful tools for many families

The first is that you are making a commitment to get rid of that debt. That might seem like a small step, but it’s absolutely necessary when you’re dealing with a significant amount or with high interest debt.

You have to be sick and tired of having that debt draining your budget month after month.

And be ready to find ways to adjust your budget so that you can have more money to finally knock that debt out.

The second key to why I believe they work so well is that it gives you a focus target. You are tackling these debts one at a time, you pay the minimum on all but one. And then as you’re knocking these out, getting that momentum and having these wins. Then you move it over to the next debt

One point I appreciated with John and David’s conversation. They looked at all the numbers including the timeframe

I’m going to include a link to a free debt payoff spreadsheet that allows you to look at the different methods and find one that fits your own plans.

And as Toni pointed out, when you’re coming up with your debt-free plan, you may have to make some compromises, at least initially so you can get your spouse on board.

She started off with family activities so that she could show her husband that it was possible to pay off debt without sacrificing quality of life.

As they had these wins, he then joined on board and they were able to speed up the process.

Finally, whatever debt free method you decide to go on, make sure that you get it done by automating all of your payments.

You can go ahead and use bill pay to schedule these payments out which can help you stay on track.

If you need help with ways to find money in your budget to get that debt, snowball, lasso, or avalanche started, please sign up for our free course, five days to five K.

It’s a week long email course that shows you some ways that you can readjust your budget. While still enjoying life now. Just head over to simplify and enjoy.com/five K.

Besides the tactics strategies and tips on paying off debt another helpful thing is having the support. So, if you haven’t already please join our free Facebook group; it’s called thriving families.

We enjoy swapping stories, encouragement, and ideas on how to tackle our family and financial goals.

You can get there by going to simplify and enjoy.com/thriving families. We’d love to see you there!

Support the Podcast!

Thank you so much for listening to the podcast! If you enjoyed this episode and found it helpful, here are some ways to support it.

  • Spread the word! If you enjoyed this episode and think it can help a buddy get on the path to dumping debt and become financially free, please share.
  • Leave a review. Honest feedback and reviews make a big difference and gets the word out about the podcast. Leave your rating and review on Apple Podcasts.
  • Grab a copy of Jumpstart Your Marriage and Your Money. My book is designed for a busy couple to set up their finances in 4 weeks. Get tips and tools that have worked for other couples on their journey of building their marriage and wealth together!

Music Credit

Our theme song is from Staircases. Additional music by various artists from Audiio.

Best Pay Off Method: Debt Snowball, Lasso, and Avalanche?

What’s the best method to speed up your debt free plan? Today we’ll review three ways to tackle your debt and break down how to find the best one for you! 

Debt Snowball, Lasso, and Avalanche: Which is the Best Debt Pay Off Method?

Welcome to the first episode of Money Decoded! I’m Elle Martinez. 

This series is all about explaining and in some cases debunking terms, ideas, and advice talked about in the personal finance space. 

While there are times when these terms can be helpful I’ve also seen where families instead are confused by them. 

I want to break things down so that you can have an easier time when it comes to making the best decision for your family and finances.

Today we’re talking about a popular goal families have when it comes to their finances – paying off debt. 

Two of the most popular ones are the debt snowball and avalanche, but there aren’t the only ones. Being in the personal finance space for over 11 years, I felt like I heard them all. 

You have debt lasso, snowflakes, , blah, blah – you get the idea. 

There’s plenty to choose from. 

The challenge is how do you find the right one for you? 

Today, we're going to be talking about a goal that many families have, which is paying off their debt.

I've been writing in the personal finance space for over a decade and I've seen so many different methods.

We have the debt, snowball, avalanche lasso, snowflakes, you name it, but the confusing part and the challenge is finding the best fit for you.

Finding the right debt-free plan for you is key because when you find one that fits you, your budget and the timeline that you're going for, you're more likely to stick with it and hit your goals.

Why don't we jump right in and talk about the differences between some of the big popular ones that have worked for families?

How Debt Snowball, Lasso, and Avalanche Work

Because we're dealing with a lot of numbers. I thought it would be easier just to put up on screen this example of a family that has plenty of deaths trying to tackle.

  • Credit #1: 
    • Balance: $5,300
    • Interest Rate: 17%
    • Min. Payment: $106
  • Credit #2: 
    • Balance: $2,000
    • Interest Rate: 14%
    • Min. Payment: $40
  • IOU to a Friend – $80
  • Car Loan:
    • Balance: $13,000
    • Interest Rate: 7%
    • Min. Payment: $257
  • Student Loan
    • Balance: $34,000
    • Interest Rate: 5%
    • Min. Payment: $194

Let's see how they would pay these off with each of the methods.

Debt Snowball

The first one we're going to be looking at is the debt snowball. The debt snowball is associated with Dave Ramsey.

With this method, you're going to take all your non-mortgage debts and you're going to list them from smallest to largest amount owed.

Then, you're going to pay the minimums on all of these, except for the one, which is the smallest. Any extra money you have, whether it's an extra 50, 100, 200, 300, – whatever it is – a month that you can put towards that debt you would.

As you pay off that particular debt, you then take that money you were putting towards that and rolling it over to the next one.

You continue this method till all your non-mortgage debt is paid off.

Debt Avalanche

The second method is the debt avalanche. You are going to be listing your debts one by one as well, but you're ranking them from highest interest rate to lowest interest rate.

You're trying to pay off the high interest debt first and just like what the debt, snowball method, what you're doing is paying the minimum on all, but one putting all that extra money that you have towards it, till it is paid off, then rolling that over to the next debt until all of your non-mortgage debts are paid off.

Debt Lasso

The last one is the debt lasso. This one is the hybrid of the two, because you're looking at the interest rate and the debt amounts.

How this is approached is that you are consolidating if you can, or using a balanced transfer program for high interest, like your credit cards so that you get them lowered enough.

Then you start using the debt snowball method because now you're focused on the amounts and this was created by the debt free guys when they had $50,000 of credit card debt.

It allowed them to pay off their debts faster than if they went with either the debt snowball or the debt avalanche.

Which Debt Free Plan is Best for Us?

Now that you have a better idea of the different methods, which one is going to be a good fit for you?

As you were listening to the explanations, you may already have been pulled to one of the methods.

My best advice is to go ahead and try it out.

The good news is even though they have slightly different approaches, there's a lot of key principles that apply, especially the fact that you're focusing in on one debt at a time, and that you're automating a lot of this process.

It is easy to try one out for a few months, see if it's a good fit and if not simply switching over.

I feel like all three of these methods are great. You're not losing by deciding to go with one over the other. Again, what is the best fit for you?

If you're still stumped on which method is right for you, I suggest starting out with the debt snowball.

One of the reasons it's been successful for many families is that those small wins up front with a smaller debts, gave them a boost and motivation to keep going.

If you can use that to propel yourself forward to becoming debt free, then go for it.

Get Started on Your Debt Payoff Plan

Understanding the financial terms is a great step in the right direction, but if you really want to have some wins with your finances, you got to take action.

So here are a few things that you can do this week.

Refinance or Negotiate Your High Interest Debt To Get a Lower Rate

The first is if you have high interest debts, see if you can get that lowered.

I mentioned with the debt lasso that they talk about doing a balance transfer. And if that's an option for you where you can get one for 12 to 18 months, and you know that you're not going to use those credit cards again, that is an option, but it's not your only one.

You can look at ways to consolidate and lower your interest rate. You can go to your local bank or credit union and see if you can refinance them as well.

Commit to Your Debt Pay Off Plan

The second step is, decide on a plan. Make sure that you commit at least for four months on this plan. Then you can reevaluate if it's the right fit for you or if you need to adjust it,.

You have to give it time to get into a rhythm and to start making progress.

Keep a Visual Reminder

The third tip I would give to you is have a visual reminder of both your progress and what you are working towards.

This is a great way to reinforce that habit and stay motivated. Now paying off debt is a great financial goal, but what's your motivation? What do you hope to do once you become debt free?

For some families it's to be able to have some flexibility with work so they can have more time at home. Others are looking to pivot their career, maybe start a business. It could be a mix of both. Maybe you have a dream of traveling more.

Whatever it is, have a visual reminder of that particular goal and also your progress. That way you can keep each other motivated on your debt-free plan.

Automate Your Finances

My last tip is after you decided which path you're going to take with your debt-free plan, make sure you automate your finances.

Willpower alone isn't enough. I know for us having automated payments was incredibly helpful because we have full lives between work, the kids and other responsibilities.

It can be easy to forget some of the smaller details. So by automating it, you know, that your money is working for you and moving towards your goals.

I hope these tips help you hit your debt-free goals faster and stay motivated while you do it.

Thanks so much for joining me!

If you have a question you want to have me tackle in a future episode, make sure you leave a comment below with your question and hit the subscribe button.

I hope you have a wonderful day. Take care!

Why the Debt Snowball Method Works

One of the best ways to simplify your finances (if you haven't done so already) is dumping your debt.

Discovering the Debt Snowball

When we got engaged and had the money talk, we discovered a few things about one another.

I had credit credit debt, a car loan, and student loans while he had a no debt, except a semester's worth of classes he was going to pay off once the grace period was over.

With that eye-opener I made a goal to pay off my credit credits before the wedding. I searched for different ways and discovered the debt snowball method.

It felt free to pay those off!

After we were married we went ahead used the debt snowball money to get rid of the car loan early. We even added some snowflakes to speed things up a little further.

If you haven't tried it, building a debt snowball can be an incredible way to giving yourself more financial freedom.

What is a Debt Snowball?

Dave Ramsey is most associated with the debt snowball as a part of his system to help people gain financial peace.

Paying off debts is the second of his seven baby steps as popularized in his book, Total Money Makeover.

Many people have sworn by Ramsey’s methods and have paid off huge amounts of debt in a year or two.

Debt Snowball Basics

Here’s how the debt snowball works:

  •  List all of your non mortgage debts from small balance to largest
  •  Pay the minimum payment on every debt
  •  Figure out how much extra you can put towards paying off your debt
  • Use that money to pay down the one with the smallest balance
  • When that is paid off, roll over that money into the next debt (old amount +minimum)
  • Repeat and keeping rolling over payments until all your debts are gone

The Power of Momentum

Many people have discovered that this method was the easiest to maintain because they only have to focus on one debt at a time. With the intense focus, it made them want to pay off the debt faster.

The debt snowball offers a behaviorally motivating set up as you get wins quicker towards the beginning.

As each debt fall off your list, you two build momentum to tackle the next debt. You’re more concerned with crossing the finishing line rather than the speed in which you get there.

Is it perfect or the most financially sound plan? No, but the results show that the debt snowball is an effective way to get rid your debt.

Automate Your Debt Snowball

You can bypass a lot of mistakes and relapses if you automate your credit card payments with online bill pay.

Most banks and credit unions offer this feature for free. Get the minimum payments set up for the secondary debts and put the maximum you can towards the first debt on your list.

As you knock out each debt, simply update your payments.

Thoughts on Getting Rid of Debt

How many of you use a snowball to get out of debt?