Yesterday, you learned the basics of the Debt Snowball and a bit of my personal story with it. Today, as promised, we’re going to look into what you should do when some bumps in the road show up. I say when, because we live in an unpredictable world. A health problem, job loss, large repair, or any number of bad things can happen to us at any time, let alone when we’re trying to accomplish something as monumental as ridding our lives of debt. No one is immune to it. So, in the immortal words of our dear departed friend, Ray Arnold…

My Personal Bumps

I’m going to share with you a few things that hit my wife and I during our time on Baby Step #2. I have a few more impactful stories (One in particular) that I really want to share here, but they happened later on in the process during Baby Step #3 and beyond, so I’ll save them for another day. However, the things below were very real, and trying, just not as emotional.

So, what were they, and how did we overcome them?

Problem(s): Large unexpected expenses. During that 5 year period, we had quite a few things pop up. These are normal items for most people.

• Large car repairs of around $1,000 (At least 3 of those). What kinds of repairs am I talking about? Replacing all four tires on both cars at the same time (Both of our cars at the time came up for inspection during the same month), brake jobs with other incidentals, stuff like that. Cars are expensive to maintain, especially with how much both of us drove for our jobs at the time.
• A home repair on our foundation that cost around $3,800

Those are the bigger ones that I can think of. Nothing too monumental, but they were enough to set us back a bit.

Solution: There are only two ways to solve problems like these. I’ll list them in the order that you should use them

1. Cash flow as much as you can. If you read the blog regarding Baby Step #1, you sort of got an idea of what that means.  So, let’s use my figure of $1,210 from yesterday’s blog that you’re currently putting toward that 3rd debt, the Bank of America card. Let’s say that while you’re in the process of paying that off, an emergency pops up to the tune of $1,000. Instead of putting $1,210 toward the card that month, you put $1,000 toward paying for the emergency, and $210 dollars toward the credit card debt. In this scenario, you don’t have to use your emergency fund. 
2. If the expense is larger than what you can cash flow (Say $2,000 in this case), then it’s time to dip into your emergency fund. after that expense, you’ll now have $210 left in your emergency fund. At this point, you should pause Baby Step #2, and focus on building your emergency fund back up to $1,000.

But, what if something WORSE happens

Obviously there are things that can happen that can completely derail your debt free journey. Stuff like a major disease (Cancer, stroke, heart attack – incidentally these are all good reasons to get life insurance NOW), custody battle, divorce. BIG stuff. In those cases, there’s not much you can do but stop the baby steps, pray, and work through all of it the best you can. After it’s resolved, then re-focus on your Baby Steps. You may even have to start over at Baby Step #1. Don’t let that deter you from doing this, though. Things like that are rare.

That’s it for this week, folks. On Monday, I’ll have some lighter reading for you. There’s one last thing you should do in order to really, truly commit yourself to this process. It’s scary, but very cathartic! Come back to find out what it is!

 

Questions about a specific situation/emergency that has come up in your life, and want to know what to do with your Baby Steps during it? Comment below, and I’ll help out!

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