Questions and Answers

When paying off debt, most of the financial gurus will tell you to pay off the debt with the highest interest. Thus it is better to pay off the $10,000 credit card at 18% interest first rather than the last $5,000 on your car at a 5% interest rate. Mathematically they are correct. Math doesn't lie, however, it does kill the spirit! Let me explain what I mean. You can pay the minimums on all debts and tackle the highest interest first. And yes, you will probably save the greatest amount on interest charges by doing this, yet it will kill your spirit. You will feel like you are making zero headway because for months on end, you will be grinding out payments and no debts will be dropping off. You see, the human psyche is a funny thing. We are result oriented people. There is nothing like the feeling of completing a task. Seeing your total mortgage amount drop every month is not nearly as satisfying as actually paying off a credit card or a car note. The unconventional advise? Organize your debts smallest amount to largest amount, all the while ignoring the interest rate. If you begin to pay off your debts by the smallest amounts first, this will give you some traction. This will make you feel like you are accomplishing something. Your spirit will become excited as you are literally closing accounts at this point! This will give you the fuel to see the process through to the end as you tackle the largest of your debts. Will you pay more in interest? Probably. I look at it as the cost for getting your self discipline back, for getting you excited about your financial future, and to give you the internal strength to see the entire process through to the end.

There are a ton of budgeting apps out there. When Martha and I started towards debt freedom, there were no zero based budgeting software programs and I became the spreadsheet Nazi. I'm pretty sure the phrase "Enough of your (insert appropriate expletive) spreadsheets" came out of her mouth a few times during our more or less 5 year journey to zero debt. Which budgeting app should you use? My guide for selection has 3 rules: 1) The software needs to be a zero based budget 2) The app needs to be free for the basics with options to purchase for more advanced features 3) Accessible by everyone involved with the budget. The following apps meet these requirements. EveryDollar.com (Only thing the free version does not have is the ability to link to your bank account which can be changed with the subscription. Martha and I have used this one for nearly 5 years now) GoodBudget.com (Limited functionality with free portion but good if your budget is super simple) What about the other apps such as Mint, YNAB, PocketGuard, or any other app? Even though YNAB is a type of zero based budget, it works on you living off the previous month's income (not a realistic situation for most people) and it costs about $85/year just to have access. The others are really good at tracking your spending; telling you how much you have spent and where. They DO NOT help you create a spending plan for the month. Again, you want something that functions on a zero based budgeting principle, is free (we are trying to save money after all!) and can be accessible by everyone involved with the budget.