Paying your debt in installments

I used this trick a lot when I was paying debt.

People nowadays call it snowflaking or snowballing, but I never had a name for it and never realized there WAS a name for it until I started reading PF blogs.

The idea was that ANY amount of extra money I had left after budgeting I’d put towards my debt. So if I budgeted $50 to be spent on a pair of shoes, and I only spent $30 or nothing at all, I’d put the remainder into my debt.

Or if I had money left over in the budget at the end of the month, like $35.76, I’d put that entire amount towards my debt, granting of course, that I had a $1000 cushion in quick Emergency Savings.

(I was really debt-crazy at one point, where I almost wanted to take all my savings and put it towards my debt just to make it go down even more.)

Another benefit of doing this, is if you know that you pay $500 a month towards your debt and you get a bi-weekly cheque.

If you put $250 towards your debt every two weeks when you receive your first paycheque and the leftover $250 towards your debt at the end of the month, it makes you feel more proactive instead of waiting until the end.

The added benefit is that it saves you a little bit in interest because you end up lowering your debt load two weeks in advance instead of doing it all at the end of the month.

Even if it was only $2.50, I’d put it towards debt. That’s why my debt sheet from the government looks like a lot of payments, when in fact, they’re all little ones.

I also liked doing it this way, because if I budgeted $1000 a month towards debt repayment, but I paid it in $250 installments each week, if something happened unexpectedly midway through the month, I’d have the remaining $500-$750 to help cushion the blow instead of having paid the $1000 in advance and running to my savings to cover the emergency.

This helped me learn how to control a budget better, as well as to feel more confident that I wasn’t just blindly paying down debt without a plan – I HAD a plan, I just had to tweak it because I was overpaying my debt or not paying enough.