The road to self-sufficiency starts with paying off debt!
Homesteading can both save and cost you money. Your simpler way of life will (hopefully) save you money. But, you will also incur expenses (animals, gardening supplies, alternative energy if you plan on switching, water catching systems). Many of those things will save you money long-term, but cost you quite a bit more at the start up.
Don't let debt stop you from having the life you want, but if you make paying it off a priority then you will be able to start your homesteading dreams that much faster. This is true for both homesteaders and preppers alike!
- Owing less means you can afford more of what you want and you will be able to live of less.
- Living off less opens up the possibility of only one (or even zero) outside the home workers.
- More time at home means a more successful homestead.
In my Homesteading on a Dime Challenge I challenge you to try to earn $5/day (I take Sunday off) using online sites. I use this money to buy things for our homestead that I want, but might not need (like my yogurt maker). If you have debt then you can use the money to start paying it down and move towards financial independence.
There are no wrong ways to pay down your debt, do what works for you. With that in mind, there are different ways to do it! Here are three debt reducing strategies:
Debt Snowball (lowest balance first)
The debt snowball method of tackling your debt is recommended by Dave Ramsey. While it is not the most mathematically sound method, it does work. When it comes to being overwhelmed with debt, logic isn't always the best solution so you need to do what works for you. When using the debt snowball method you will pay the minimum on everything and put everything extra towards the smallest balance.
PROS – Using the debt snowball method will allow you to cross entire items off your list of debts more quickly since you are tackling the smallest amounts first. This will give you a mental boost every time you pay off a debt.
CONS – On the other side, the debt snowball method may leave you paying down a 5% loan instead of the one you are paying 20% on simply because it is a smaller amount. This will cost you more money in interest over the long run.
Debt Avalanche (highest interest rate first)
The debt avalanche repayment method is the most logical. If you get rid of the highest interest rate credit cards first then you will saving the most money. In the highest interest rate first method you list out your debts in order of highest to lowest interest rates. Pay the minimum on everything and the extra payment goes toward the debt with the highest interest rate. When that debt is gone you move down the list.
PROS – This debt repayment method is the most mathematically sound. Compared with the other methods you will pay the least amount of money back.
CONS – If your highest balance card has the highest interest rate then it might be years before you pay something off completely. Even though you are paying down on your debt, it can be frustrating to not see one disappear.
Equal Debt Reduction
This method splits all the extra money you have between all of your accounts so you are paying your debts at the same rate. Personally, I am not a fan of this method. They will be paid off about the same time, which is a plus, but there isn't a mental or financial reason to do it this way. In this method you will be paying the minimum on everything then evenly splitting the extra payment and adding it to the minimum for each debt.
PROS – honestly, there really isn't one that I can think of
CONS – It is hard to see progress. If you have five cards and an extra $100 each month then that extra $20 on each card is harder to see than $100 on one card.
