So there you are, doing an amazing job paying off all of your debt, when BAM! Life happens.
Have you ever wondered if it’s a good time to pause your debt snowball?
If you’re like me and SUPER on FIRE with your debt free journey, it’s probably the last thing you want to do! But there are definitely a few cases where pausing your debt snowball can prevent falling further in to debt, or busting your budget all together!
My husband and I are working Dave Ramsey’s baby step plan and we are in baby step 2 right now (pay off all debt).
Related: How to pay off debt fast
We made some huge life changes to be able to pay off a lot of debt really fast, and we get so excited to make big debt payments each month.
Our aggressive debt pay off plan has allowed us to pay off nearly $80,000 in just 11 months, but once the Coronavirus pandemic entered the situation, we had to pause our debt snowball.
We went back and forth with the idea, but knew it was the right move.
I was so sad to have to pause the debt snowball. I was afraid we would lose our progress!
However, I also knew that it would only be temporary, and that we would catch back up, as soon as our income stabilized again.
The most important thing was that we didn’t go further in to debt to cover our living expenses, during these uncertain times.
Since we are small business owners, our income is only guaranteed if we can work!
Although we are doctors (and an essential business), we are podiatrists and our patient population declined quite a bit during the shut down.
When the shut down began, we weren’t able to pay ourselves at all, and so we got some part time jobs at Amazon and Door Dash so that we could make sure to pay our living expenses while all of this was going on.
We didn’t want to throw all of our extra income (if any) at debt because there were just too many unknowns. What if we got sick and couldn’t work for several weeks? What if we weren’t able to open our clinic back up full time for several months?
These were all very real concerns and so pausing the debt snowball to pile up cash was the best plan we could put in place. It helped us to feel like we had some sort of control during a time that was so out of our control!
Now that things are beginning to open back up, I would normally say we should re-start our debt snowball, but we are getting ready for a big move to a new office.
I know there will be unexpected expenses that come along with that move, so we are continuing to pause our debt snowball until the end of August when all of these variables are stabilized once again.
We aren’t losing as much ground as you might think, because we are simply saving the money that would have gone to debt.
At the end of August we will put this extra money on our next smallest debts and resume our debt snowball as planned.
Are you thinking of pausing your debt snowball for a few months, or even longer?
As long as you have a plan, and are intentional with your savings and timeline, you won’t lose your baby step progress!
Here are a few reasons that you might want to pause the debt snowball.
There can be a lot of variables with pregnancy and childbirth.
Make sure you familiarize yourself with your health insurance plan, so there are no surprises with what you are expected to pay.
You might be responsible for a large deductible, and things like co-pays and co-insurance for each visit.
We all pray for a healthy birth, but if you end up needing a few extra days in the hospital, you want to be sure you are stress free with the cash in the bank to cover anything out of the ordinary.
Once everyone is healthy and home from the hospital, you can take your pile of savings and throw it on your debt!
This will give you a nice big boost of motivation to restart your debt snowball.
If you lose your job and all you have is your Baby Step 1 starter emergency fund, you will want to stop paying off your debt, and start using that extra cash to support you and your family until you find another job.
We definitely felt the sting of reduced pay during the Coronavirus shut down, and having only that $1,000 emergency fund in the bank was a little bit scary!
However, we never ended up needing to dig in to our emergency fund because we stopped paying debt and started saving, and we even picked up part time jobs to get us through the interim until we could pay ourselves again.
Pause the debt snowball until you can find another job to replace your income (or maybe even better than you were making before!)
Once you are settled in your new job, and have adjusted your budget accordingly, you can restart your debt snowball without fear.
Cash flow a (necessary) large purchase
Sometimes you need to buy something big or expensive during your debt free journey.
We experienced this when our office xray machine went down unexpectedly.
If this happens, it’s probably a good idea to pause the debt snowball so you can use that extra cash flow to save up quickly for the purchase.
Don’t go further in to debt to pay for the purchase! You will feel defeated and struggle to get back on the wagon.
Simply pause your debt snowball, save for the large purchase, and once you have that covered you can continue to pay off the next debt!
A few examples of large purchases that you might need to pause the debt snowball for include:
- Car is about to break down
- Planning to propose and need to buy a ring
- Saving for a wedding
- Air conditioning or heating system goes out
- Need a new roof
- Washer and dryer break down
There are several other examples, but you get the idea! Try not to rationalize large expenses as necessary if you really don’t need them.
Remember, once you’re debt free you will have the freedom to save up and make large purchases all of the time!
If you know you have a big move coming up, it might be best to pile up cash just in case any unexpected moving expenses pop up.
Moving can be an expensive and stressful endeavor, so it’s best to save up and be prepared just in case.
Once you are settled in to your new location, found your new job, etc., you can begin making debt payments right away.
Any other huge life change
If you’re going through a divorce, or another difficult life event, it’s best to pause your debt snowball until you are able to decide if there will be any unexpected costs associated with the life change.
You’re in college
If you’re a college student, the best use of your money is to make sure that you graduate without going any further in to debt.
If you have a scholarship or family member paying for your school, it might be tempting to use any money that you save to pay off student loans that you may have accrued.
However, the best thing to do is to pile up cash as an insurance policy for your degree.
Once you graduate, you can start throwing money at any debt you have acquired.
The Coronavirus is a perfect example of a national emergency that affected a lot of jobs.
If you are concerned that you could be furloughed or laid off in the near future, it’s best to pause your debt snowball until you can stabilize your life and income.
Related: What to do in an emergency when you have a lot of debt
Have you had to pause the debt snowball recently?
Are you wondering if it’s time to pause the debt snowball, or curious when you are ready to start back up again?
Let me know what questions you have!
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