I visited South Africa in late fall of 1994. I was on the USS HALYBURTON. Our ship and another were the first U.S. Navy ships to visit in 30 some years. I distinctly remember being approached on the street by a South African Citizen who told us how happy he was to see us and thanked us profusely for “staying away during Apartheid”. Really impacted me.
I was reminded of this as I considered Nelson Mandela’s legacy to the nation of South Africa.
Wall Street Journal had a good article.by Rich
The debt snowball method has been around for a while. It was popularized by personal finance guru Dave Ramsey.
The premise of the debt snowball is that if you have more than one instance of consumer debt (car loan, credit card etc.) you should pay off the smallest balance first, not the one with the highest interest rate. The idea here is that a small victory on a small balance will give you further incentive to keep working on paying off the next bigger debt. Additionally, you can apply the monthly payment that was going to the first small balance toward the next debt with its requisite payment allowing you to crush each debt with larger and larger monthly payment amounts.
Vertex42.com has a great Excel based snowball calculator that can show you how fast and how much interest it will cost to pay off all your debts. You can select the Snowball method as described above or the “blizzard” method which pays off the highest interest loans first, or a custom method you define. This is a handy tool for planning your strategy of escaping debt.
Vertex 42 has a lot of Excel templates and instruction if you are new to Excel or want to brush up on your skills/knowledge.
The main reason? Out of sight out of mind. He doesn’t think of it and consequently has a balance in the “bank” of over $150 in a few months of savings (some birthday money thrown in there too).
This is a perfect lesson on how we ought to save. Set up the money to come out of your paycheck before you even see it, or at least have it transferred before you can spend it. This is the old “Pay yourself first’ mantra. When you do this, you are much less likely to miss the money you never had. If you try to wait until the end of the month and save what’s left, you’ll end up with lint from your pockets.
I use a similar strategy with pay raises. As active duty military, we usually get a small percentage pay raise each Jan 1st. I just bump up my TSP amount to coincide and I never see/miss the pay raise. Same thing on even year anniversaries of my active duty service, I get a small bump in pay, just save it ahead of time.
What strategies do you use to “pay yourself first”? Tell me in the comments.by Rich