Eliminating Debt Using Snowball Method

In Avalanche vs Snowball Method: Methods for Paying Down Debt, I wrote about the differences between the two for paying down debt. At the end of that article, I wrote about my own method for paying down my debts. Here I am going to give you guys a progress report for how much debt I've been eliminating, some adjustments, and how much I've been investing. 

At the beginning of January, I started with $25,615.85 in debt. By the end of April, I had a closing debt of $22,926.65. Most of that was due to the snowball method, but by the end of April, I avalanched my Citi credit card with a large sum of money to expedite the process. Here is what happened. 

At the beginning of January, I balance transferred all of my previous credit card debts from one credit card into two credit cards to take advantage of 18 and 12 months of interest-free promotional rates. This was a decent move because the credit  card I had used prior started charging an APR of 27% after the interest-free promo rate. I also did this after some criteria of my credit score was freed up to make sure that my score didn't take too much of a hit. I applied for the first credit card in November, which arrived by December. Then I applied for the second credit card in December which then arrived by January.

Balance Transfer #1

The larger balance transfer was for a term of 12 months at 0% interest rate. It had a principle balance of $4,500 with transfer fees of $135. This account was the one I planned on only paying minimums as I was focusing on the smaller principle balance of credit card number 2.

Balance Transfer #2

The smaller balance transfer, as you see above, was for a term of 18 months at 0% interest rate. It had a principle balance of $2,512.95 plus $125 comprising of transfer fees. This was the account that I planned on snowballing. Every 10% of my income was to go towards paying this down. However, by the end of April, I liquidated my Robinhood trading account balance and avalanched this debt by nearly half. I paid $1,100 with my trading balance, and then $210 with funds from my bank balance. There were a few reasons why I liquidated my Robinhood trading account, and why I decided to avalanche one of my debts.

Current Citi Credit Balance

The first reason why I liquidated my trading balance from Robinhood was because it was becoming too trash for me to use. Because the market was slowing down, liquidity in stocks and options was going lower, and I was losing money due to either poor trades or lack of liquidity by Robinhood. Because their trading interface was not conducive to my trading style, and was too slow to execute, I had to switch brokers. I opened an account with Ally Invest. I also moved the remaining cash to pay down my debts as it wasn't working for me short term. I transferred over $1,264 to my bank account, and used $1,100 to pay down a big chunk of my credit card debt. This was the most conservative play, and the wisest. I also used some income I earned to cut down this debt further to what you see now: $736.05. 

January Starting CC Debt (Includes transfer fees):
Citi Credit Card:  $2,637.95
Redacted Credit Card: $4,635

April Ending CC Debt:
Citi Credit Card: $736.05
Redacted Credit Card: $4,360

The largest debt that I owe is student loan debt. However, this is the least priority debt because I have the ability to apply for income-driven repayment plans. Since this was also a low interest debt made up of different groups, I have the ability to use the snowball method and pay based on how much I earn. Normally, they would force me to pay a minimum amount per month based on how much the fully amortized loan amount would be. But since I applied for Income based repayment, I don't have to pay a huge sum per month, and I can pay as much or as little as I want. If you've read part 1 of this blog series, you would know that I always pay 10% of each income that I receive, and I focus on the smallest loan first. I also pay down the interest and some of the principle of the other loan groups weekly to keep amortizing the loan and compounding the reduction. 

Tip: Paying a smaller amount weekly, for example $25 per week for 4 weeks, will pay down the interest accrued earlier than if you paid $100 once a month. You will pay off the principle balance earlier if you paid weekly if that makes sense.  This also works because my loans accrue daily. If I keep paying off the interest accrued sooner on the ancillary loans, I can pay off the focused loan (smallest loan in the snowball method) much quicker.

A snapshot of how my loans are grouped and their APR; Read below for current numbers

January, 2019 Starting Loan:
Loan C: $5,431.81 
Loan D: $7,390.44 
Loan E: $2,219.71
Loan F: $3,307.35
Total: $18,342.9

April, 2019 Ending Loan:
Loan C: 5,388.31
Loan D: 7,283.12 
Loan E: 1,870.71 
Loan F: 3,277.65
Total: 17,830.60

January Total Starting Debt: $25,615.85
April Total Ending Debt: $22,926.65 

Every 10% of my income, I invest into either M1Finance or Crypto; I have been holding in cash lately

Every time I earn money, I invest 10% of it into M1Finance or Crypto, depending on the prices. On the image shown, I have already invested $244 into assets, while I'm holding $268 in cash to wait for an opportunity to buy stocks cheap. 80% of my portfolio has been in dividend paying assets that have a history of appreciation and with large amounts of cash. If you want to view my portfolio, check it out here.

This year, I've paid off $2,689 in debt, and invested about $200 into crypto and $500 into equities. The other 20% of my income, I have been saving in interest yielding accounts for a rainy day and future investments. Please stay tuned to this series if you want to check my progress in reducing debt and investing more. 
 
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