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Debt magic demystified

I see the repackaged debt snowball method is making the rounds again. Let’s not make this overcomplicated. You can do this.

1. Find out what you owe to everyone. That’s your car, your mortgage, your student loans, your credit cards, and anything else like that.

2. Record the total amount and the minimum payment at the very least. Record how you pay it (online or by mailing it in) and the address and due date if you’re really ambitious.

3. Pick one and start paying it off. Make the minimum payment on everything else. Pay extra on the high-priority one. Don’t get too hung up on interest rates and stuff like that. If you’ve got something that’s 0% for six months and then the rate adjusts, fine, pay that one off first. But don’t let the indecision paralyze you.

I like the idea of paying off the lowest balance first. The thrill of eliminating one helps keep you going. Yes, it’s a mind game. But it was marketers’ mind games that helped get you into debt in the first place.

Attack the highest interest rate first if you must. You’ll get done perhaps a month or two sooner. But the worst possible debt snowball strategy still gets rid of the debt years sooner than none at all.

4. Once one is paid off, pick another one and keep going.

That’s all there is to it. You don’t have to buy anything. You’ll get it done in seven years or less, because traditionally banks haven’t been willing to loan you more than you’d be able to pay off in seven years anyway, even if they give you 30 years to do it.

It was when banks started getting willing to give mortgages to people like my infant son that the financial system started melting down. Yes, my two-year-old got a letter in the mail offering him a mortgage when he was still drinking formula from a bottle.

The question is where to get that extra money to put toward the debt at the top of your list.

The answer is anywhere you can. Don’t fall for pyramid schemes and get rich quick schemes. That will only distract you and make more for other people than it makes for you. Just knuckle down, save what you can, scrape up what you can, and get it done.

Look at what you’re spending, make sure your spouse is on board, and look for ways to cut it. If you only use your Netflix subscription a few times a month, cancel the subscription and start using Redbox for a dollar instead. Watch movies at home instead of going to the theater. Brown-bag your lunch instead of eating out. Once you start looking, you’ll find things, and don’t think you have to find everything at once.

Scrape up what you can and send it in, and try to scrape up more next month.

I drank Chase and Sanborn coffee for a couple of years. A big can cost five bucks, and by saving my previous day’s grounds and adding a tablespoon or so of fresh, I was able to make one of those cans last a good 6-8 months. It was lousy coffee. But it woke me up while costing maybe a nickel a day, which sure beats the $5 cups at Starbucks. My wife felt sorry for me, so she bought me a can of Folger’s for my birthday one year. I cut it with what was left of my Chase and Sanborn, applied the same routine, and had less lousy coffee for about a year.

Being willing to do junk like that got my mortgage paid off in considerably less than seven years. And if you think I’m making this up, you don’t know me very well.

I didn’t steal used coffee grounds from work, because that just seems wrong.

These days I buy the big cans of brand-name coffee whenever they’re on sale and I use them, and I throw away my grounds after one use.

I’m not saying you have to go to that extreme. But the more sacrifices you make now, the faster you get done, and the fewer sacrifices you have to make in the future.

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