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PAY OFF SOME DEBT Debt is nothing but a chain of slavery around your neck. When you’re in debt, your creditors will always have some degree of control over you. Freeing yourself of this chain, even if link by link, will put control back into your hands. Where do you start? Believe it or not giraffes offer the best example: go after the low hanging fruit first! In the case of debt reduction low hanging fruits are the smaller debts that are more easily paid off. This particular debt will become your focus. If you have consumer debt then you have less money to save. Generally speaking, the amount you are most likely spending on debt interest will surpass any amount you would collect in interest on savings or investments. Get rid of the debt first. The debt you pay off first doesn’t have to necessarily be a credit card either. It can be any contractual payment agreement you are bound to. One example is rental furniture or appliances. Get rid of them and figure out an alternative until you can buy the furniture or appliance. You may have to make sacrifices to pay off this debt but you will be glad you did. FOCUS There are a lot of good things to be said about building positive momentum when it comes to debt busting. Dave Ramsey likes to call it the snowball effect. A small snowball can roll down hill collecting more snow as it rolls. The bigger it gets the more snow it collects with each roll. It eventually becomes a giant snowball rolling at a tremendously fast pace. The same will happen to your debt when you focus on paying it off. The small snowball is your smallest loan or debt. Focus all your effort on paying off that small loan. Once you pay that off you will find that it becomes easier and easier to pay off more debt. Over time your debt snowball turns into an avalanche of new found cash. The cash that you are not spending on loans anymore! The key is to arrange your affairs so that you are putting the maximum amount of effort into paying off that one debt. All other debts are on minimum payments. You could even go so far as to ask for interest free extensions, loan freezing, or new terms on your other loans so that you can put more toward the first debt. Paying that debt off gives you several advantages. It has a psychological effect. That payoff gives you affirmation that you can do this! It also will give your credit rating a boost. You’ve demonstrated to yourself that you can manage and direct your money which results in paying off entire debts. CELEBRATE Years ago when people paid off their mortgage they had mortgage burning parties. They took their mortgage loan paperwork and burned it to celebrate their new liberation from mortgage debt. Remember the mortgage burning party Archie and Edith Bunker had years ago? You should also celebrate your milestone. Do it every time you entirely pay off a debt. Now, don’t go into debt with your celebration! Enjoy the feeling and share it with your family. The best celebrations are done with others. So don’t be afraid to talk to your close friends and family about your goal. It is nice to have encouragement from others. If you have positive and supportive people in your life, than include them in on your plan. Celebrating with them at the end of your debt will be that much sweeter. One thing to remember is that sometimes there are going to be people who don’t understand what you doing and aren’t so positive about it. Don’t let that stop you. Stay focused on your goal of paying off debt one by one and then celebrate as each success happens. Bowman’s Money College offers consulting and educational advice to individuals and families on personal financial matters such as starting a small business, writing and following a household budget, and rebuilding credit. For further information visit BowmansMoneyCollege.com or email mike@bowmansmoneycollege.com. |
