Chapter 4: The Pay Off Method

TranscrIpt:

Hi! Welcome to this week’s training! I’m Sherri Wilson, owner of Genius Communication, the place for all things business. Head on over after this podcast (or during) and grab some of my free resources like my Brand Personality Quiz, resources for persuasion and rapport, and more. I’ve even got stuff just for introverts. On today’s episode, we are continuing my debt payoff journey. And I want to dive into some nuts and bolts of how I did it to help you if you find yourself just starting your debt payoff.

Snowball versus avalanche

If you’ve been around business for any length of time (heck just alive on the planet), you’ve heard of the snowball debt payoff method and possibly the avalanche method. The idea behind the snowball method is that you start with your smallest credit card balance, and when you pay that one off, you take that payment and add it to the next card’s payment until you’re down to the one and making a huge payment to finish off the highest balance card. Of course, you continue paying on your other cards with the minimum payment while you focus on one card at a time for pay off. Most experts recommend this method because you create small victories at the start to keep the motivation going.

This is a great method and the one I started off with. But it wasn’t long before I switched to the avalanche method because the snowball was taking too long. On top of that, I know that motivation has a shelf life and is often a myth when it comes to change. You can listen to: A Simple Trick to Triple Your Chances of Success and find a great tool called, Intentional Interrupt, to help you change habits and learn about why motivation is the last thing you need.

The avalanche method is where you take the highest interest cards and start paying those off. If you have two cards that have the same interest rate, start with the higher balance then do the card with the lower balance next. Boy, did it work! I paid hundreds to thousands on my card every month and by the time I got to the lowest interest card, it was fast and weird! I had to get used to not having 10 credit card statements come in each month. I was so used to paying on cards that I went through a phase where I was afraid I was missing a card payment. Oh, and I was very irritated when cards would send me a “bill” for a zero balance payment that month. How mean is that! My stomach would drop because I’d think every time, “I thought I paid this off.” Then when I’d open it, I’d be irritated.

My reward system

Another great tool for creating new habits and transformation in life is creating a reward system. Here’s how I did mine for debt pay off. When we started, I had 10 cards we were paying on. When I paid off a huge balance card, especially early, I would reward myself with a larger reward. For example, I really needed a new couch and loveseat, so I bought one after paying off a $14,000 card. When I’d pay off a small card or a grouping of cards like 2-3, then I’d have a smaller reward like an item I had wanted for a long time, a small trip, or eating out at a restaurant. This kept me motivated. When I instituted my reward system, it increased my focus and determination.

emergency fund

When I started paying off my debt, I had zero savings. I knew that I needed at least $500 in an ER Fund to keep Murphey’s Law at bay. I funded that at the same time I started paying debt. It took 10 months of $50 a month because, remember, we had way more debt than money. Once I had half my cards paid, I put another $500 in there. Now, I am working on funding my six month ER fund since all debt is paid.

Generosity

Many ask me if I continued to tithe and give offerings. I’ll get into that more in the next chapter, but, yes, I tithed and gave offerings because generosity kicks a kingdom law of wealth into action. Plus I love Jesus and know that He will never abandon nor do without a cheerful giver!

to be continued…

That was my debt pay off strategy. Next week, I’ll get into the giving aspect of my debt pay off, which is probably one of the most important pieces and the importance of vision!