Dave Ramsey Baby Steps – shemakescents

Finance Blogger, Danielle YB Vason of She Makes Cents, reveals her motivation to pay off debt.

52 Week BINGO Money Challenge | March Recap

Published on April 8, 2017April 11, 2017 by Danielle YB Vason2 Comments

Welcome to the weekend #SMCmoneytribe. Congratulations on finishing month 3 of the She Makes Cents 52 Week BINGO Money Challenge! How does it feel to see your money grow and know that you are closer to your goals than you were before you started the challenge? Keep that feeling close in the coming months. This is around the time, where people need the most motivation to keep going. As I revealed in the February recap, 80% of people fail their resolutions by February. If you are still going hard on this challenge, you are already more focused and goal-driven than most people. While the challenge isn’t hard, it does take discipline and consistency. I must admit I even found myself getting a little behind and then having to catch up before the end of the month. I am happy to report I am all caught up with a new sense of motivation.

How I Stay Motivation Doing The Money Challenge

Every once in a while, I calculate how long it would take me to pay off the remaining $17,940.40 in student loan debt I owe if I only made the monthly payment. The answer- 11 years and 3 months. Then I calculate how long it would take me and how much interest I would save if I added extra money toward the principal. For example, if I paid an extra $300.00 per month starting in April 2017 toward this goal, I would only have 3 years and 6 months left to pay on this loan. That’s right, making an additional $300.00 payment per month toward my student loans would shave off 7 years and 9 months off the term of the loan and would save me a little more than $5,550.00 in extra interest. Let that soak in for a minute, shall we. If I were to up the ante even more and started paying an additional $500.00 per month starting August 2017 instead of the $300.00 in the example above, I would be able to pay the loan off in 2 years and 8 months, shave off 8 years and 7 months of the repayment term, and save $5,862.60 in interest. Now folks, if that doesn’t motivate you, I don’t know what will. When I feel myself drifting off my path to financial freedom, I take a moment and do this exercise. It immediately fills me with a sense of inspiration, purpose, and energy especially considering that my student loans are the only thing now keeping me from moving from Baby Step 2 to Baby Step 3.

The March Recap

For the month of March, I saved $72.00 which puts me at a YTD of $221.00 through the end of March. I save more money than the previous month and I am really looking forward to what April brings. The end of April represents the end of the first quarter of the challenge which is when I will take the 2017 savings from this challenge and make a principal payment toward my student loan debt! If my financial projects for next month are correct, April will be the most successful month of the challenge thus far. Want to join the challenge? Click here for your FREE money card download.

How The Debt to Credit Ratio Affects Your Credit Score

Published on February 2, 2017June 30, 2020 by Danielle YB Vason2 Comments

debt-to-credit-ratio-credit-score-she-makes-cents Last year, one of my girlfriends and I decided that we were going to pay off our credit cards at the same time. I was paying down debt to start my snowball and get me one step closer to Dave Ramsey’s Baby Step Three. She was knocking down her revolving debt before she purchased her first home. In the process of us paying down our credit cards, we were both offered limit increases from our perspective credit card companies. I accepted the increase and she declined. Her rationale to decline was that she was trying to get rid of her monthly credit card payments because a limit increase would only entice her to spend. For me, accepting the almost $5,000.00 increase meant that I was lowering my debt to credit ratio.

What is A Debt to Credit Ratio?

A debt to credit ratio or a credit utilization ratio is just as it sounds….It’s the ratio of how much money you owe a particular debt as compared to the credit limit. If you have $4,000.00 balance on $10,000.00 credit limit, your debt represents 40% of your credit limit. The lower the ratio or percentage the better impact one’s credit score.

How The Debt to Credit Ratio Affects Your Credit Score

Outside of your payment history, your “amount owed” or debt to credit ratio, is the second highest factor in calculating an estimated 30% your credit score. Keep your balance under the 30% mark and you stay on the lower side of the debt to credit ratio, which is where most personal finance gurus would urge you to stay if you have to carry a balance.

At the same time that my credit card limit jumped up $5,000.00, my balance was quickly decreasing and I had a credit score of 786. The next month it moved up six points and stayed that way for three months. In July, the month I paid off my credit card, it jumped to 806 for about two months. I started using my credit card just a little bit carrying a small balance and it went back down to an 800 for about three months. I was on a high when I saw my score increasing so to see the decrease was disappointing…even if it was only a 6 point drop. I vowed then to do whatever I could to not let my credit card balance roll over to the next month ever again. I am happy to report that I currently have an 810 credit score. Moral of the story… lower your debt to credit ratio and it will have a positive impact on your credit score. You can do this by making on time payments to lower your debt balances and if you are offered a limit increase, take it only if you can continue to be responsible with your financial goals.

Dave Ramsey’s 7 Baby Steps Explained

Published on January 18, 2017February 23, 2017 by Danielle YB Vason9 Comments

Hey #SMCmoneytribe! Yesterday I took a little time out of my day to create an infographic for you that provides a quick overview into Dave Ramsey’s Baby Steps. I wanted to do this for you because I reference these steps in a lot of my writing because they have become the meat and potatoes of my financial plan. If you are a long time reader of She Makes Cents, you might remember when I was so excited to get to the second part of Baby Step 2 that I tried a risky financial move of playing financial Russian Roulette. Let’s just say the outcome was not what I expected when my car broke down one week later and I only had half of an emergency fund to help me out. (P.S. According to Ramsey, car maintenance is not an emergency and rather something that should be budgeted for).