BUILDING AND MANAGING WEALTH AS AN EQUINE PRACTITIONER


cover unexpected life events, not to cover an overdrawn checking account or to fund a vacation. If your current savings account contains more than $1000, all surplus funds will be applied to your debt in Baby Step 2. If you do not have $1000 in savings, you will contribute all additional income to the emergency fund until it reaches a total of $1000.4 Thesecondbaby stepof theDaveRamsey plan is to


pay off all debt (except a mortgage on your home) using the debt snowball method. Using the snowball method means that you will focus any extra income on the smallest debt first while paying the minimum payments on everything else. Once the smallest debt is paid off, you will take that payment and apply it to the next smallest debt and so on until all debt is paid off.4 The reason for using the snowballmethod versus starting with the high interest rate debt first (also known as the avalanchemethod) is simple. The intent of the snowball method is to knock out numerous small debts upfront, activating our reward system and releasing dopamine—one of our feel-good neuro- transmitter. Feeling good about what we’ve done increases the likelihood of repeating this behavior, keeping usmotivated to play the long game.2 In the author’s experience (a 2011 graduate), all


student loans were assigned the same interest rate. This may not be the case for all individuals. In the last 15years, fixed interest rates for Federal Stafford Unsubsidized Loans have varied from as high as 6.8% (2006–2013) to as low as 2.75% (2020–2021).5 If you have student loans with variable interest rates, paying them off utilizing the avalanche method may result in less interest paid over time. However, you may not receive the same motivating psychological benefits discussed above. Baby Step 2 begins by making a list of all debt,


including car loans, credit cards, student loans, and any other consumer debt from smallest to largest, regardless of interest rate.4 Sitting down and listing all of your debt can seem like a daunting task. The total can add up very quickly, reaching a sum for which a payoff seems unattainable. But don’tbe dis- couraged. The only way to fixthe problemis to have a clear understanding of what the issue looks like and develop actionable steps to rectify it. Once a list of debts has been made, take a look at


how money is being spent. That means developing a monthly budget.4 A budget allows you to organize, track, and be accountable for your income and spend- ing habits. If you’re in partnership, working on a budget together enables you to decide if you’re able to liveoff oneperson’s income and apply the other’s income toward debt. Having a visual representa- tion of your money through your budget highlights where you’re overspending and where you can afford to cut back on your expenses. Spending $25 to $50 each time you go to the grocery store may not seem like a lot until you see the sum of $500 spent for one person’s needs. A helpful tip for stay- ing on budget is using the “envelope method.” This means that for different categories, such as


250 2022 / Vol. 68 / AAEP PROCEEDINGS


groceries and entertainment, the allotted monthly budget is held in an envelope in the formof cash.Only having cash on hand to spend, without the backup of a credit card, makes you more mindful of your spend- ing. When it’s gone, you cannot spend more. Also, budgeting apps (such as GoodBudget, YNAB, and EveryDollar) can help you stay organized and on- track by enabling transactions to be entered at the time of purchase or downloaded from your bank, alert- ing you to the remaining funds available, and compar- ing your spending habits frommonth tomonth. Paying off a large sum of debt often requires that


youmakesomedrastic changes toincreasetheoverall amount ofmoney available to pay toward the balance. Therearetwoways to find additional money. First, take a look at your budget. Decreasing your overall monthly expenditures will enable you to make the most of your current paycheck. Second, increase your overall income by finding additional income sources. Beloware suggestions for accomplishing both. Suggestions for ways to decrease overall monthly expenses are listed below:


• Ditch personal credit cards and go cash only. • Utilize cash back from business credit cards to pay for personal items.


• Cut out cable services and utilize less expensive streaming options.


• Reduce the cost of internet services (most pro- viders allow a yearly price reduction).


• Price shop for cell phone service. If you have per- mission to utilize your business phone for perso- nal use, consider canceling your personal phone.


• Buy used and if buying new, only do so if you can find a sale or a coupon.


• Rent books, audiobooks, and movies for free at the library.


• Find other cheap or free entertainment options in your local community.


• Pause or discontinue subscriptions and member- ships.


• Trade babysitting with another family. • Make coffee and meals at home (no takeout or eating out).


• Make a grocery list or buy groceries online to reduce the likelihood of impulse buying.


• Contact credit card companies about waiving and/or lowering interest rates.


• Eliminate or reduce car payments by purchas- ing a less expensive vehicle.


• Pause retirement and savings investments. • Downsize your home or rental unit.


Options for increasing your overall income:


• Sell anything and everything you have no attachment to. If you haven’t used or worn it in the last year, sell it.


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