Step #1: The Emergency Fund
When money is tight the thought of coming up with an extra $1,000 can seem overwhelming, if not impossible. But a vital element to success in your journey to achieve financial peace is establishing a $1,000 fund for those emergencies that will surely come during the process of eliminating debt or building wealth.
Our financial coaching services will help you develop a plan to quickly put together your emergency fund and prepare yourself for the next “baby step” implementing your debt snowball.
Step #2: The Debt Snowball
The “debt snowball” is a simple concept with powerful results. Here’s how it works – list all of your debts from smallest to biggest. Don’t worry about interest rates, just list them out, smallest to biggest.
Then, start doing everything you can to pay off the debts beginning with the smallest. Once you pay that debt off, then go to the next debt applying the payments that you used on the prior debt that was just paid off.
Over time, you are putting some serious monthly payments towards your debt and when that happens you start to pay them off very quickly.
Step #3: 3 to 6 Months of Expenses
Once you have paid off your debts using the debt snowball, it is time to fully fund your emergency fund. At the start of your journey, you set aside $1,000 in case of emergencies. Now it is time to set aside enough money to be able to cover your monthly expenses for a period of three (3) to six (6) months.
Whether you choose three (3) or six (6) months will largely depend on how stable your monthly income is. If you have a secure job with steady income three (3) months will likely be sufficient. However, if you are self-employed or have variable income six (6) months is the way to go.
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John Skiba, Esq.
We offer a free consultation to discuss your debt problem and help you put together a game plan to eliminate your debt once and for all. Give us a call at (480) 420-4028