I have read a lot about the debt snowball technique. Dave Ramsey appears to beleive that you should pay down your debt with the smallest amount owing and work your way to the largest amount owing, thus giving yourself a mental boost in acheiving some small goals quickly . Gail Vaz Oxlade appears to beleive that you should pay down your debt with the greatest interest rate first, so that your debt costs you the least amount of money in the long run.
Whichever way you pay your debt, we (PF bloggers everywhere) GET that the snowball techniques works very well.
For those who dont know, click HERE for Wikipedia's definition of a Debt Snowball
Has anyone considered a savings snowball?!
Once my credit card is paid off, which will be in the next 8 weeks, I want to reach my savings goals as quickly as possible. I want to do this to have peace of mind, and to be able to seriously consider amalgamating my and Jordan's finances together, in whichever way winds up working best for us.
Above and beyond the house fund contributions, I figure I will have about $500/month to put towards the various savings goals I have. This is what I came up with for my savings snowball, what do you think?
I may change the details a bit, but I wanted to put this out as an idea.
By the end of next year (2010), I will have saved and paid for two christmases, met my E-fund goal, and met my first tier RRSP goal (if I follow this plan) & be ready to join finances with Jordan (unless we find a way to reach our goals together, before then).
Have you ever tried a savings snowball? Do you think their are phycological benefits to trying to reach your smallest savings goal first, and then building your way to the largest savings goal?
Since my debt is interest-free, I'm paying a steady $500 per month, no more, no less. (Well that could change, but that's the plan now.) So any extra money I get I'm "snowballing" it into my Emergency Fund. It's not my smallest savings goal, but it is my next-step savings goal, and then I'll move on to more fun things like Travel or a Gift fund or something like that. I have found that adding a tiny bit helps it add up. For example, if you budgeted $50 for clothes and only spend $40, that extra $10 per month adds up and eventually you'll reach your goal.
ReplyDeleteI used it to acheive my mini EF, my xmas fund and am currently using it to get to my wee RRSP contribution. For many people, smaller, more frequent goals, seem to work better than long range, larger goals.
ReplyDeleteThis makes sense on more than 1 level. Christmas will be here soonest, your car could require a repair that is not budgeted for and ramping up your RRSP gives you an extra pot you could tap via the first time homeowners program when you are ready to buy a house.
ReplyDeleteThe only modification I would consider after you have this Christmas nailed, is to put a little of that $500 into fun and work wardrobe, because you have been very tight for a long time.
Thanks for stopping by - I am going to have a look around your blog too :) Nice to meet you ;)
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