Exploring the snowball, new things, and breaking routines

Author

Logan
May 16, 2024

In partnership with

Exploring the snowball, new things, and breaking routines

Welcome to the Intentional Dollar weekly newsletter — great work taking this small step to move your money forward. I’m Logan, a Certified Financial Planner™, and I’m excited you’re here!

What’s inside?

  • One tool to experiment with

  • Two quotes from others

  • Three questions to dig deeper

  • Four lines of poetry for the point

Disclaimer: This is not investment advice. These weekly posts represent my simple thoughts, a few quotes, and some questions — for educational purposes only.

Check out today’s sponsor: 

Learn from investing legends.

Warren Buffett reads for 8 hours a day. What if you only have 5 minutes a day? Then, read Value Investor Daily. We scour the portfolios of top value investors and bring you all their best ideas.

One tool to experiment with:

The Snowball:

A snowball is better than an avalanche.

This holds true with your debt as well.

Debt can be a bit of an enigma, and when you’re staring at a heaping pile of it, determining the best way to deal is daunting. So where should you start?

Start by segmenting your debt into buckets with the associated interest rates and balances. You will gain clarity on the pieces that make the pile. $20,000 in student loan debt is often the aggregate of 5-10 smaller loans — split them out.

By breaking the pieces of your debt up, you can start to organize it according to one of two popular payoff methods:

  1. Highest interest rate, down to lowest interest rate

  2. Lowest balance, down to highest balance

Today we are focusing on the second approach, or more popularly known as, the debt snowball. 

The debt snowball method is one of the most effective means to conquer the debt mountain. This approach aims to pay minimums on all of your debt while concentrating the rest of your “debt cash flow” toward your lowest balance debt.

If you have $500/month going out to service your debt, but your minimums are only $300 — debt snowball says to allocate the extra $200 to your lowest balance.

You will see that the incremental cash flow eats into the principal balance of the low value debt and helps pay it off faster. Notice you’re not paying more toward debt. You are shifting the dollars to create psychological wins.

When you finish the lowest balance, you roll all the dollars you were deploying into that debt and move it up to the second lowest balance. Repeat until debt free.

Like a snowball gaining mass and momentum downhill, your debt payments will grow in stature on each tier, and you will feel real, meaningful progress along the way.

This works because you gift yourself small wins on the long journey. Each win is like an aid station for a long race — enough fuel and energy to keep trekking on.

If you have one consolidated balance, all at one interest rate, or if your mortgage is your only outstanding debt, you can still apply the snowball.

In either case, you can split your big balance into tiers.

Let’s say your mortgage is $200,000 and represents your only outstanding debt. You can break this down into $5,000 buckets and create micro goals along the way. Each time you make a payment you are closer to knocking out a $5,000 tier. Each tier erased is clear cause for celebration.

Small wins keep you excited to be on the path. Small wins accumulate into large wins down the road.

start rolling your small snowballs

Two quotes on new things:

New things give new lessons, new perspectives, new opportunities, new stories, new successes, and new ideas — so try something new this week.

“We keep moving forward, opening new doors, and doing new things, because we’re curious and curiosity keeps leading us down new paths.“

Walt Disney

“I hope that in this year to come, you make mistakes. Because if you are making mistakes, then you are making new things, trying new things, learning, living, pushing yourself, changing yourself, changing your world. You’re doing things you’ve never done before, and more importantly, you’re doing something.”

Neil Gaiman

Three questions on breaking routines:

  1. What’s one way I can break a tired routine today? Different route to work, new place for coffee, short walk after dinner?

  2. How can I make a standard routine more interesting? Instead of running after work, run to work. Instead of logging expenses on your couch, log at a coffee shop.

  3. What interesting routines do I observe in those around me? How might I steal them?

Which question stuck with you? Questions like these are spotlights for the mind. Reply to this email and let me know which one shined light on a previously dark cave.

Four lines of poetry for the point:

A small snowball rolls slowly down the hill,

Knocking out your little debts, and growing bigger still.

An avalanche created, your debt no longer there,

Mighty are the slow, small things; the tortoise and the hare.

Contact Me:

Content ideas, questions? Reply to this email or reach out to me at [email protected]

Additional Sponsors:

Get smarter on AI in 5 minutes a day.

The Rundown is the world’s largest AI newsletter, read by over 600,000 professionals from companies like Apple, OpenAI, NASA, Tesla, and more.

Their expert research team spends all day learning what’s new in AI and gives you ‘the rundown’ of the most important developments in one free email every morning.

The result? Readers not only keep up with the insane pace of AI but also learn why it actually matters.

Disclaimer: This is not investment advice. These weekly posts represent my simple thoughts, a few quotes, and some questions — for educational purposes only.

Reply

or to participate.