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This question comes from T.H.:

HI DAVID
I WOULD LIKE TO KNOW HOW TO REALLY GET STARTED WITH THE SNOWBALL METHOD? MY HUSBAND AND I BOTH HAVE FAIRLY GOOD INCOMES AND WE SHOULD NOT BE STRUGGLING LIKE WE ARE. THE PROBLEM IS THAT WE ARE BEHIND ON BILLS, AND EACH MONTH, WE PAY THE MOST IMPORTANT ONES FIRST, BUT WE ARE NEVER CAUGHT UP, AND CONTINUE TO BE A MONTH BEHIND ON EVERYTHING. HOW CAN WE GET CAUGHT UP AND START WORKING THE SNOWBALL METHOD? PLEASE HELP.

T.H., sorry for the late reply.  Here’s where I would start…having been in that situation I can tell you what I did.

Here was my situation:

Income: $3400 a month
Rent: $1325 a month
Student loans: $234 a month
Car loan: $388 a month
Visa: $63 a month
Master Card: $109 a month
Department store card: $34 a month
Department store card: $42 a month
eBay: $100 +/-
Groceries: $150 a month (wait for it)
Netflix: $20 a month
Cable: $84 a month
Internet: $50 a month
Cell phone: $100 a month
Home phone: $35 a month
Auto insurance: $55 a month
Del Taco (and other restaurants): $475 a month +/- (wasn’t that worth the wait?)
Gas and Entertainment: $Whatever was left and then some.

So, I was spending everything I had and then some.  My credit card balances seemed to increase every month even though I was paying everything they asked for, (the minimum), and I wasn’t charging nearly as much as I use to…so I thought.  Embarrassed to say, but I even had a few bank charges from NSF’s about every other month.

When I finally woke up out of my crazy consumer spending when my car needed more fuel than I could afford.  When I say afford, I mean I was broke and all my credit cards were maxed out.  I stretched so thin that I couldn’t see a way out.  When I say I couldn’t see a way out I mean that I didn’t see the waste as waste.  I needed my high-speed Internet and cable to keep up with the world.  I needed to spend money at restaurants because I couldn’t cook.  I ate crappy food because it was really easy to eat crappy food.

So, where did I start?  You guessed it.  My student loans.  Even though I was spending about $600 a month on food, I still wanted to maintain my unhealthy lifestyle and let my creditors foot the bill.

The student loan forbearance was easy…I just lied.  I’m not suggesting you lie to any of your creditors ever; it’s just what I did.  I called my lender and explained to them that I had just been laid off and would like a 6 month forbearance on my loan.  I didn’t tell them I knew it was coming so I got another job lined up.  That came on a need to know basis, in my opinion.  They gave me the six month forbearance.

Now I had an extra $234 a month right off the bat.  Whew!  I could afford gas again.  Problem solved, right?  Nope.  Six months went by…then seven…then eight…then in the ninth month I started getting some peculiar calls and letters from my student loan lender.  They were concerned that I had ignored the new payment book.  I lied again.  I told them that I got sick and couldn’t find another job and asked that they give me more time.  They gave me another six months.  That was easy.  Ok, not easy, because now everything was about the same except that I started wanting more stuff that I couldn’t afford.  Stuff like health insurance and necessary medication.

Funny thing when you eat crappy food for a long period of time you start to not be well physically.  If I could afford a gym membership I would get one…it just works out to about $300 a visit to the gym, (meaning I would go about once a year right after the start of a new year).

I started to think about what life would be like without all these bills and took a long, hard look at my life-style.

What was next?  That’s right, I called my car loan people and asked them if I could skip a payment.  No problem, they would just tack it on at the end of the loan.  Ok, not a great long-term solution but at least I was starting something.  I had about $600 extra that month paid off one of the department store cards.

Miracle of miracles, I discovered the snowball method.  I discovered something that already existed but I didn’t know it.  Now I learned how to cook.  Since I had to start making car payments again, I did something I never thought I would do…I went to the garage and pulled out a couple pots and pans to make dinner.  I told myself that I am going to cook for one week and not spend any money at a restaurant.

I’m not suggesting at all that I ate well that week; it was pretty awful.  But, I discovered that tuna, ramen, spinach, and hot sauce do make a balanced meal for about $2 a meal even if it tastes like warm garbage and smells about the same.  The good news is that I saved about $150 that week.  I needed to do that a couple more weeks and I could make my car payment and have money left over to pay a nice chunk on my next card.

Unfortunately, I was only able to muster another week of restaurant sobriety and was only able to save another $150.  Still, not bad.

That month I paid the full minimum plus another $200 on one of my high interest department store cards.

I got really excited and decided I should kill the cable and netflix if I’m really going to do this thing.  The process was repeated and I paid off the aforementioned department store card.

I kept that up and just kept paying off the cards, then the car, then the loans.  I wasn’t always perfect.  Sometimes I justified charging something I didn’t need.  Other times I was stronger than I thought I ever could be.

The bottom line is that it came down to my lifestyle choices.  If you make a decent income and you just can’t figure out where it all goes, just put it in a spreadsheet.  Put down everything you’ve been spending lately and see if it’s stuff you really need.

If it takes you 6 months, a year, 2 years or more…just keep at it; you’re going to get debt free.  Sacrifice now so you can be large and in charge when you’re done.  Your credit should be in amazing shape after all that.

My grandfather told me that “Nothing is free and only the good stuff is hard to get.”  Financial freedom is hard to get so it must be the good stuff.

You can do this!  Cut those expenses and pay something off to get started.

I hope it helps and please post another comment if you have some more specifics to analyze.

Thank you,

David