Chasing the Bull

I absolutely love reading personal finance blogs. You really cannot go wrong reading MyInvestingBlog, PaidTwice, or Frugal Dad just to name a few. Reading does becomes a problem, however, when you spend so much time reading about other people’s ideas and efforts that you really get nothing done for yourself. That is where I found myself lately.

I spend hours each night reading up on my favorite “friends”. Your success is MY success and I cheer you on wholeheartedly. Over the last few weeks, however, I kept asking myself why more good things were not happening to me. Why is my debt not going down? How is it possible that my net worth is actually going down?

The answer is pretty obvious, now that I stepped back and took a good hard look at myself and my free time. After reading Dave Ramsey’s The Total Money Makeover, I decided to act.

Of course, Paid Twice has been snowflaking for a while now, and I have read about it constantly of other great blogs. The key that many people overlook is that once you learn something new, you have to actually practice to get better. Major league baseball players do not just show up at game time and hit 300. Track and field stars do not expect to win anything unless they leave it all on the practice field, day in and day out.

My wife and I are now practicing what we have learned. I feel vindicated that the hours spent reading have actually turned into something I can use in my day-to-day life. Thanks for sharing your thoughts and blogging about it for the whole world to see. I truly appreciate it.

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By now, most people have heard of the “debt snowball” popularized by Dave Ramsey. The theory is that you should organize your debt from smallest to largest. Pay the minimum payments on all of your debt except for the debt with the smallest balance. For this debt, you attack it with any additional funds available until it is eliminated. Then you move on to the next item on your list.

I had never really paid much attention to my debt. After reading Dave Ramsey’s The Total Money Makeover, I have taken a second look at my debt.

As of today, I have the following debt:

Personal Loan @ 6% - $7,635.17
Student Loan @ 4.25% - $10,368.65

As I mentioned here, I am getting a large tax refund. Additionally, I will receive a tax rebate of $1,500 sometime in June. Finally, I sold the stocks in my cash account for approximately $5,155. In June, I will apply $6,655 from the tax rebate and stock sale to the personal loan. I will also take $238 from my tax refund to pay off this loan completely.

This will leave the student loan as the only debt remaining (besides my mortgage). To tackle this loan, I will take the payments I usually make to the personal loan and add it to the payments I usually make for the student loan. Doing so, I should pay off the student loan by May 1, 2010.

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OK. So I may be a little late to the whole debt snowball revolution. As I have a 19-month old son, baby steps had a completely different meaning to me than it may mean to you. I have been cruising along, rather ignorant of the fact that I am drowning in debt.It is pretty easy to get into the argument of “good debt” versus “bad debt” but lately I am starting to believe that all debt is bad debt. If I did not have my student loan payment, I would have $100 more to invest (or spend) each month. If I did not live off of my credit cards while incurring that student loan debt, I would have an additional $400 extra each month. All said, I owe $18,000 in debt other than my mortgage (which is huge in and of itself).

After reading The Total Money Makeover this weekend, I have decided to begin my own Money Makeover. Searching the net, I have found numerous writers that have eliminated tremendous amounts of debt with a lot of hard work and maturity. Over the next few posts, I will be outlining my money makeover path.

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