Step 1: Save $1,000 emergency fund – COMPLETE
Step 2: Pay off all debt – snow ball method
I’m currently in step 2 which is to use the snowball method to pay off all debt. For those of you who aren’t familiar with the snowball method, you line up all of your debts from smallest to largest (regardless of interest rate) and pay all the minimums. Anything extra you have after the minimum goes towards the smallest debt to knock it out faster and build momentum. Once that debt is knocked out you do the same for the next debt. My debt is listed below from smallest to largest:
Invisalign – $2,800 – GOAL is to payoff by April 14th
IRS – $8,335 – GOAL is to payoff by August 4th
Student Loan – $132,000 – GOAL is to payoff by December 2019
TOTAL – $143,135
I got Invisalign a few months ago after hating my teeth for years. I thought insurance would cover more than it did but OH WELL they didn’t so I’m saddled with that debt to my dentist. It’s interest free so I should be able to take care of it in a few months.
That lovely IRS debt came from a “mistake” on an old tax return the IRS recently decided to assess. I deducted my student loans as a business expense which is a confusing gray area if you read the IRS webpage. I could probably get this reduced but the amount I would pay in lawyer fees would cancel out anything the IRS would settle for. I’m trying to deal with it myself so that may or may not come off in a few weeks.
Lastly, my lovely student loans coming in for the win. My goal is to payoff these by December 2019!! That is a super lofty goal. Huge payoff in only three years! More on the budget I plan to follow in the next post.