Hey everybody… it’s Mick B. and I’m coming at yall with another classic joint! Ok… so maybe I’m not on a hip hop record, but a gal can dream can’t she? Anyways, I’m just here so that I don’t get fired…

Who am I kidding, this is my show and I run it as I see fit! I am here to today to talk about the elephant in the room. The ugly monster under the bed that no one wants to peek and see. The thorn in everyone’s side. The American Dream! Well.. kinda. This post is about America’s worst invention yet… DEBT! Everybody wants the American Dream, but what the people who already have this so called dream fail to tell others is that it is accomplished by extreme, crazy, outrageous amounts of DEBT!

Many people struggle with debt in this here society. Upwards of 8 out of 10 American adults has it. The most popular types of debt? Credit cards, mortgages, car loans and student loans. Although from my list it may seem as though debt is only a problem of high saddity American folk… Regular everyday minimum wage, high school graduates and drop-outs, and renters have debt too. The difference? You see a lot of payday loans (loans where you borrow money until your next pay check at a large price), title loans (where you give the title of your car as collateral until you can pay the loan off) and rent-to-own businesses (businesses where you purchase furniture at a low weekly or monthly price, only to have paid an absurd amount for a cheap piece of furniture when its all said and done. Oh missed a payment? They’re going to take that furniture back!).

You see, debt has become Americas Achilles hill… every since the dollar was taken off of the gold standard, America too, has been in debt. $587 BILLION in debt to be more specific. So, don’t feel bad! Your $500- $200,000 in debt is NOTHINGGGG!

Well what I am here for today is to help provide you a solution for the debt problem you are facing. Many of us look at our incoming mail and get sick in the stomach thinking about how much we owe everyone. I know that I do. The thought of owing someone else stresses me out, big time. But it is the beginning of the year and as usual, one of my goals is to dig myself out of debt, again! That’s the thing about debt… as soon as you get rid of it, it seems like it comes right back! Paid off that credit card last year, why is 75% of my credit being utilized right now?! UGH! But there is hope people. Also, there are scissors.

Step 1: BUY SCISSORS

Step 2: CUT UP ALL THE CREDIT CARDS!

Whew, that was easy wasn’t it? Okay, now that we’ve got that over with we can get down to business. I think its fair to say there are 3 schools of thought when it comes to debt, maybe four:

1. Pay off the debt with the smallest debt first (also called the snowball effect)
2. Pay off the debt with the highest interest first
3. Make the minimum payment on your debt until it is all paid off shrugs
4. Pay whatever, whenever

 

Clearly, #1 and #2 would be the best choices. While paying off debt focusing on the interest rate may be the most effective, I always feel the most productive using the “Snowball” method.

Although #3 and #4 are probably what some of us are doing right now, the point is that when you know better, you do better. And I’m going to share some items of thought in KNOWING better.

 SNOWBALL Method

 

DEBT	Interest	Amount Owed	Min. Payment	Actual Payment
Macy’s Retail Card	24.5%	$300	$25	$25
Bank of America Credit Card	21.49%	$600	$25	$25
Chase Credit	0%	$2800	$25	$25
Doctors Bill	0%	$200	$50	$200
Student Loans	6.1 %	$20,000	$225	$225

 

Let’s assume that with our monthly take home pay, we have $500 to pay towards debt each month. Taking the snowball method, we would pay the debt with the lowest balance first. Therefore, we would aim to pay our debts off in the following order: (1) Doctor’s Bill, (2) Macy’s, (3) Bank of America, (4) Chase Credit Card and finally our (5) student loans.

With making the minimum payments on everything (excluding the Doctor’s Bill), we would have $200 left over. We would then take that $200 and put it towards the doctor’s bill. There, that was easy! Now the doctor’s bill is paid off! In month 1, we have brought our total number of open debt accounts from 5 to 4, talk about progress.. GEEZ!

Now in month 2, our doctor’s bill is paid off. Our second largest debt is our Macy’s card. Using the snowball approach, we know that paying the minimum on our debts, excluding the Macy’s card (Student loan bill + Chase bill + Bank of America Bill), will cost us $275. Thus, leaving $225 to pay towards our Macy’s Card.

 

DEBT	Interest	Amount Owed	Min. Payment	Actual Payment
Macy’s Retail Card	24.5%	$300	$25	$225
Bank of America Credit Card	21.49%	$600	$25	$25
Chase Credit	0%	$2800	$25	$25
Doctors Bill	0%	0	0	0
Student Loans	6.1 %	$20,000	$225	$225

 

In month 3, we will again have $275 in other debts to pay, leaving us $225 again to pay towards our Macy’s card. Oh but wait, we only owe $75 more dollars on our Macy’s card, so now what do we do? We pay that Macy’s card off (gone girl! * or dude*)! We have an additional $150 to pay towards debt in month 3, in addition to having paid off our Macy’s card. The answer is simple really, buy a new pair of shoes and treat yourself to a massage (hehe) orrrrr you could be responsible and pay off more debt! #3 on the list is the Chase Credit card.

So we take all of our extra debt money and dump it on our Chase Card until the balance is $0 and move on to the next. You just keep going and going, like the energizer bunny, until you’re out of debt!

It’s a really simple method. I probably love it the most because it gives me a sense of accomplishment. Could I pay off my debt with the highest interest first? Yea, maybe, but I wouldn’t feel nearly as successful. I like to see results. I feel as though I would lose my drive if I kept paying on something that felt like it would never go away. This way you feel like you actually did something. You can look at a bank account balance and see a zero balance.. it’s just something about that .

P.S. I probably forgot to mention this, but in case you were wondering, this method works best if you don’t add any additional debt to your repertoire while you are paying off the debt you already have.

What is your favorite method of paying off debt? Have you ever tried the snowball method before? Does it work for you? Comment below. Like and subscribe to my blog to stay up to date on the goings on of my little black blog.