How we spend our time and how we spend our money often run in tandem. However, let’s be careful not to use the limiting mindset and the finite amount of time we have when our kids are young to justify overspending. A lot of this work exists in figuring out what you value most and then lining up how you spend your minutes and how you spend your dollars in alignment with those values.
Let’s talk about paying off debt. Allison shares her story of debt reduction after SURPRISE! she and her husband got pregnant on their honeymoon and then OH CRAP! daycare is expensive. That surprise pregnancy resulted in them sitting down and totalling up their collective debt. Once they looked, in total they had $111,000 in debt and the $1,400 minimum monthly payment seemed incredibly overwhelming to two newlywed teachers who were expecting a baby and didn’t know the first thing about budgeting, building wealth, and paying off debt.
Allison shares what they did to pay off $111,000 in 4 and a half years, all while having two babies, working as an elementary school and a middle school band director. At first she despised budgeting and all things personal finance… but then budgeting turned into part of the fabric of Allison’s life… she went from a woman who was budgeting to a budgeter… who was in control of her money, working hard to get out of debt and no longer looking the other way. She had faced down her debt, made a plan, paid it off and she couldn’t stop talking about budgeting.
Inspired Budget was born & now Allison helps women to help give them tools to pay off debt and gain confidence along the way! Allison now teaches on social media all about how to nail budgeting and to start feeling like a budgeter. In her teachings, downloads, free and paid trainings, Allison tackles things like mindset (“I don’t need a budget”), attitude (“I just don’t want to budget!”), logistics (“I’m going to budget for the life I wish I had” regarding money, budgeting, debt reduction and being in control of your future.
CHANGING THE WAY OUR KIDS SEE MONEY
We dive into privilege and the access to information and learning about money, investing, debt and financial success. We unpacked the taboo topic that is money management and why we didn’t learn about it as children and how we can change this narrative in parenting the next generation.
Money is tied so closely to our lives, to the everyday, to special occasions, to the future and things like what retirement looks like, how our children enter college or the workforce, that you simply cannot ignore it’s existence and it is absolutely important to get control of this tool that is money.
When it comes to debt reduction and the ages old debate between debt-snowball and debt-avalanche, Allison recommends whatever plan that you are going to be consistent and stick with. It’s not the math that matters, it’s the commitment to showing up and continuing to pay off debt month-after-month and feel good, see progress and be encouraged to stay the course.
DEBT- SNOWBALL VS. DEBT-AVALANCHE
Debt-Snowball is where you send minimum payments to all debts but the smallest balance debt. That smallest debt you send MAXIMUM payments to – the most you can, until isn’t completely g.o.n.e. Having listed your debts from smallest payoff balance to largest balance, once you pay off the smallest balance, that money “rolls over” gathering momentum (or snow, if you like that visual) to the second smallest debt and so-on and so-forth. You work your way down the list from smallest to largest payoff balance.
Debt-Avalanche is where you do that process, but instead of prioritizing by payoff balance, you list your debts from highest to lowest interest rate. You pay minimum payments on everything by the highest interest rate, and to that you send as much money as you can each month. Once that one is gone, that money slides down (hence – avalanche) to the debt with the second highest interest rate and you make your way down the list.
If you want quick psychological wins to encourage you and keep you on track, consider the debt-snowball. If you love math and the prospect of getting those higher interest rates out of your life sooner rather than later is exciting to you, consider the debt-avalanche. It doesn’t matter which you pick, it’s that you choose one, have the hard conversations with your spouse, get on the same page about your plan for debt reduction and then… do it. Consistently. Sticking with it over time. That is the path to debt-freedom, my friend!