Welcome back to the course! You’re so close to making your first official Debt Snowball payment! Since the start of the course, you’ve worked on creating Debt Accounts and Envelopes in Goodbudget, and found your snowball payment amount. At the end of this assignment, you’ll be ready to throw your first snowball!
Here’s what you can expect in this assignment:
- First, you’ll learn how to “fill” your budget Envelopes, including your new Debt Payment Envelope, so you can start tracking your spending in them.
- You’ll learn how to add transactions in Goodbudget, so you’re ready to record your snowball payment to your Debt Payment Envelope when you make your real-life payment.
Remember, the Debt Snowball plan is all about helping you crush debt by creating a snowball payment and then using that to tackle one debt at a time from smallest to largest (while paying the minimums on everything else). You’ve already created a budget and built your snowball; now you just have to get that snowball ready in your Debt Payment Envelope for when it’s time for you to make your first debt payment.
But before we get started, let’s hear from Karisa. When she was asked if it was easy to make her first large debt payment. she said,
“No! It was the biggest sum of money that had left my hands at one time, and that was super scary. I was so nervous to press the submit button that I had to call my roommate in so she could be my moral support.”
Now we’re not sharing this to make you feel worried or frightened, but instead to highlight that it’s totally normal to feel a little nervousness as you get started on your debt journey. And if you do feel nervous, be sure to turn to a budgeting partner or trusted friend for reassurance or encouragement.
Now, let’s get to the nuts and bolts of today’s assignment.
Fill your Envelopes
In the last assignment, you worked on adding Envelopes to your budget to help guide your spending and to make sure that paying down debt was a priority. When you created those Envelopes, you gave them budgeted amounts that represented how much you plan to spend on that particular item each month. But those Envelopes aren’t ready to use yet because they haven’t been filled with cash.
Filling your Envelopes is the step where you take the available money you have sitting in your Goodbudget Accounts and add it to your Envelopes.
In addition to filling your regular Envelopes, you’ll also need to have your snowball amount set aside in the right Debt Payment Envelope before you can record your Debt Transaction against it.
Here’s how you can do both:
1. Create a Fill from Unallocated:
If you already use Goodbudget and your Envelopes have already been filled for this month, you can create a new Fill from Unallocated to add your snowball amount to your Debt Payment Envelope. You might need to take money from other Envelopes to cover your snowball payment if those Envelopes have extra funds that won’t need to be used.
- Alternatively, if you already have what you need sitting in Unallocated, you can create an Envelope Transfer to quickly move funds from Unallocated to your Debt Payment Envelope.
If you’re new to Goodbudget, none of your Envelopes will have been filled yet, so you’ll create a Fill from Unallocated to add funds to all of your Envelopes, including to your Debt Payment Envelopes. Remember that your snowball amount will live in the Debt Payment Envelope belonging to your debt with the smallest balance.
NOTE: If you don’t have your snowball payment available in Unallocated right now, that’s okay! That money might have been used to pay other bills or necessities. In that case, instead of filling your Debt Payment Envelope right now, create a Scheduled Income that will add your next paycheck to Unallocated when it comes in, and then either fill your Debt Payment Envelope then using the steps above, or create a Scheduled Fill from Unallocated now that will post the day your paycheck arrives.
PRO TIP: If you have some extra savings that you don’t have a plan for, you can make your first snowball payment even bigger by using some of those savings to pay down debt a little faster. That’s actually what Karisa did to make her first debt snowball payment a little bigger for the first month to build momentum. But only consider using extra savings if you already have an emergency fund in place.
2. Start/continue recording your regular spending: Now that you’ve filled your Envelopes, you can start adding your spending to your Envelopes in Goodbudget. You’ll learn how to record your snowball payment below.
Add your Debt Snowball payment
1. Add your debt payment: After you’ve made your real-life debt payment, you’ll need to add it as a debt payment in Goodbudget.
- NOTE: Remember to continue paying the minimums on all your other debts!
Amazing! You’re now ready to make your first debt snowball payment. You’re officially on your way to tackling your debt.
Remember, the hard work isn’t over once you’ve paid off your smallest debt. Once you have, you’ll add that payment amount to your next smallest debt’s monthly payment so you can start paying that off more quickly. As you continue to pay off one debt at a time, your snowball payment will get bigger and bigger as it builds momentum and helps you tackle debts more quickly. You’ll be heading toward debt freedom at super speed!
We know Karisa was so nervous making her first large debt payment that she needed some encouragement from her roommate.
Tell us, what are you experiencing as you gear up to make your first payment? Or if you’ve already made it, how did you feel after?