Step 4: Momentum – Use Momentum (Debt Snowball – Dave Ramsey)
I love listening to Dave Ramsey on the radio. Common sense talk about debt. I’m especially passionate about this subject.
As a people, we have become a want-it-now, pay-for-it-later society.
It shows up in buying stuff we don’t need, buying cars we can’t afford (but lenders will loan us money for), overspending on housing (because we can get a loan for it), getting student loan debt to pay for college (not realizing that many people don’t even graduate from college – but still keep the debt, or that the jobs that that degree will qualify us for are either non-existent or the return on that investment really isn’t there).
So we spend and we spend and we spend.
And then find ourselves in a hole we can’t seem to get out of.
So lets say you now are $50,000 in debt and want to get out. How are you going to do it?
Classic advice says start on the debt with the highest interest rate and pay that off first. Now that makes financial sense (you’re saving money faster by paying off the high interest loan first) but it ignores the psychological element. If it takes you a year to pay down that loan, you may not make it to the year mark before you get frustrated and stop.
That is where Dave Ramsey’s “Debt Snowball” comes in. You start with the debt with the smallest balance and pay that off first. That may only take a couple months to do. Then you move onto the next biggest and so on. What it does is give you some early successes in order to keep you motivated. Dave does the same thing with saving your first $1,000 then a three to six month emergency fund then saving in your 401-k. Moving through his “baby steps” get you to your goal before you know it…and with much less pain along the way.
Or you could do it by taking money out of your paycheck pretax with automatic withdrawals to your 401-k. By doing it automatically you hardly miss it after a couple months. Your spending adjusts to the new level and you find your 401-k growing without even thinking about it.
How could you apply this to weight loss?
You’d bring lunch from home once the first week, twice the 2nd, and so on.
Or walk three days this week then four the next week then jog one of those days the following week and so on until you’re jogging 3-4 days a week.
Or drop one junk food item each week.
Or maybe you want to combine a couple areas – you eliminate meals out and that pay that money into your vacation fund – a win-win.
You get the gist of it. Momentum built quickly and quietly often turns into long-term habits and you actually enjoy and get excited about.