So today I was reading various strategies that people use to pay off their debt. More specifically, the two methods that were in discussion was the debt snowball or debt avalanche method where one was more focused on the psychological aspect of encouraging people to pay off their bills and the other was to get rid of it as efficient as possible.

In a nutshell, for the debt snowball method you are supposed to organize all of the debt you have and your goal is to essentially pay off the smallest debt first. An example would be if you had two credit cards with an outstanding balance where you have to pay interest on it each month. You would then first pay the minimum payment on both cards so that you don’t incur interest. Afterwards, any money that you have left over should go towards paying off whichever card has the least amount of balance on it. After you are done with that you then continue on to the next debt. So as you can tell, this is supposed to give people the motivation to continue to paying off their debt.

For the debt avalanche method it would start off the same where you would first organize all of your debt and begin by paying the minimum on all of your current liabilities. However, the priority in terms of which bill you should pay off first is the one that generates the most interest debt. Mathematically, with this method you would be paying less interest fees and will ultimately be debt free faster.

This is where the debate begins as some say while one method makes more sense on paper, realistically more people are more likely to succeed with the other method as you get the sense of accomplishment faster by getting rid of small debt with the snowball method. With the avalanche method some were saying because you won’t be able to pay off a bill as fast that people will usually lose motivation to keep at it.

For myself if I was to choose I would use the avalanche method as it makes more sense. The funny thing to me is that I would say a big factor in paying off debt is the whole notion of even looking at the numbers in the first place. For example, I usually find people that spend too much are the same people that don’t even track their spending. If you were to take the first step with both of these examples I’m sure just looking at the debt and knowing where all your money is going to is the real factor that makes you want to be smarter with your money. Essentially, regardless of which way you choose you just have to do something in constantly keeping yourself informed about your finances.

I was talking to some people about the notion of needing a budget in order to keep your finances in good health. Basically, each month you should be writing down how much you have and how much you can allocate to certain things such as entertainment or essentials. The funny thing for myself is I personally don’t use a budget in that sense. Instead, I keep myself constantly in tune with how much I have and how much I am spending. With that it becomes like a challenge of sort where if I am going to take money out of an account then I always ask myself how fast can I replenish it without it harming the ability for the funds to grow. It really makes me think of my purchases and the future.

For example, I know a lot of people would think having zero dollars and no debt is the safe zone. However, to me for example $10,000 would be like a safe zone and it makes me want to at least maintain that number and make it go up. I guess another way to think about it is it’s kind of like food and your health. Some people would say you have to follow a strict diet plan if you want to keep the pounds under control and others would say you just need to be constantly knowledgeable and aware of what you are putting in your body. For me, being aware is more of my preference personally as with that it’s a lifestyle habit and not say a one time thing.

I have often heard the argument that going with being more aware route must be stressing as each day you are worrying about what to buy. It’s really not the case, for me anyways. It’s almost like my mind is accustomed to quickly going through an algorithm where I look at the product, the price, I start thinking about value such as if the item has ever gone cheaper, think about any goals I have in the future and whether or not this item will help me, etc. If it passes all these quick flash tests then I can start seriously thinking if I should spend the money.

To me it is no real difference than say people who wouldn’t eat a piece of fruit because it smells bad or has bruises all over. Basically, it’s not like you stand there for hours debating if you think it will be good for you or not. Instead, you have naturally learned that those are potential signs that the product isn’t that good and that putting it in your body can mean bad things later. In my opinion, having this same approach with money is the way to go in my view.

I was kind of surprised today that I read how a person was trying to convince others that if you want to have fun in life then that means you have to spend money. For this example specifically, there was a hockey game and while people were there watching it and having fun one person was saying how people should all wager some bets as that is the only way to have fun.

I just had to think about that comment for second. While I recognize he could have just been saying that as a peer pressure way to get people to spend money, it’s actually not that uncommon for people to say if you don’t spend your money in ways like that then you are not enjoying life. I was even trying to think of this in a silly scenario such as a parent going to their kid’s sporting event where the fun and enjoyment should be about watching them compete and all only to then have two parents say they need to bet each other to make this fun.

In like high school this was things like cigarettes where people said if you don’t do it then you must not be having fun as you only live once. Speaking for myself, it didn’t make sense then and it doesn’t make sense now. I find that around a more mature age group of people this scenario is the same except the most common example is people say you either you spend all your money like how they do as well or else you are classified as having a boring life.

I think the main mentality I have developed to overcome this peer pressure type of mentality when it comes to spending money is that I recognize in many cases people say things like this because they want to live that experience through you, if that makes sense. For example, if you are the only one that has five thousand dollars to spare and you went with another person where you both saw this crazy TV that he/she can’ afford, them pressuring you to buy it would be almost the same as if they bought it themselves. So when you think about it, is you spending money in that case more for your entertainment or someone else’s?

I was even joking how isn’t it the other way around many times where if people want that kind of entertainment then they are usually paying the person to see them do it? Either way, it should be more about doing what is best for you.

I was reading a debate today of how some people were saying that the cost of living was too expensive and that the average salary of a regular working family simply doesn’t make ends meat. As usual people kind of broke it down into categories such as how much it costs for food, transportation and enlisting one’s child in school. One topic that I personally found kind of interesting was that a personal daycare was on the list as a necessity. The reason being was that in these specific scenarios both parents worked full time and therefore they have to use a daycare.

This got me thinking where if we as individuals should be planning this out instead of forcing ourselves to be in that situation. For example, before we decide to bring a child into the world I am sure many people consider the financial implications and if they can’t afford it then they simply say they need to hold off. I know the most stereotypical example in this case for a couple is that they plan it where one person would stay at home and the other would be the one that is going to work each day. That is still an option right?

At the same time, nowadays with so many ways to telecommute or to create a side business I know many people opt to have one person go out and work at the nine to five while the other is at home with the child and is also doing a small home based business on the side. So therefore, they have everything planned out to take care of their kids and the finances. I was reading some numbers too such as people spending from $600 to $3000 a month in daycare fees. Just as a food for thought, if you do pay say $3000 a month and assuming one person’s yearly salary equals that would you be inclined to say it’s better to take care of the child yourself? As expected, the conversation started to turn into a personal values debate instead.

I always find topics like this interesting when it comes to finance as in some ways it feels like since we were only taught and showed one one to do something that it must be the only option. However, like for this I’m sure if we sat down and really thought about it there are probably a lot of different solutions that are available.

Today I watched a segment about a site called livebelowtheline.com where essentially people are trying to live on a mere budget of $1.75 a day as a way to create awareness about people who live in extreme poverty. From what I gather they try to challenge people to do this for about five days which means your total would be about $8.75.

While that sounds pretty extreme, I was thinking to myself for those people that are doing the challenge for longer than five days on why they aren’t opting to invest in like a plant that grows fruits or vegetables. For example, it seems like everyone is more caught up in trying to find the best deals from stores when growing the items yourself can be pretty straight forward and it will save you a ton of money. I remember for example my parents had these small plants in the backyard that grew cherry tomatoes and those things grew so darn fast.

I guess you could argue that for some plants they take weeks to grow anything which doesn’t do much good if you need the food today, but I guess like money it’s about investing in something that gives you constant returns on your investment. Like for those cherry tomatoes I believe buying a small pack of them would cost you around $2 to $3. If you bought one like every five days it wouldn’t be a bad idea to invest in like seeds or something where eventually your plant will start producing the tomatoes and you can start saving the $3 a week.

Ultimately I think the big takeaway in situations like this when it comes to food is that if you are on an extreme budget then one key is to find ways to take your dependency off a business as much as possible. I always saw things like going to a grocery store as essentially you paying for the convenience as opposed to it being the main way you must do things. Same thing when it comes to say hiring a professional in a lot of cases. It’s not that you have to necessarily use them but rather you are paying them for the convenience and efficiency of you not having to immensely study about a topic yourself.

Either way, interesting concept that if anything it should make you think that if you are one to always say you have no money for food maybe it’s time t see how others can do it with such a miniscule budget.