Finding yourself with a mountain of debt can be a frightening time and it’s easy to feel that getting yourself free from debt is out of reach. While you may feel temporarily panicked, the good news is that with careful handling, debt can be easily managed – the key is to start small.
If you entered yourself into a marathon, you wouldn’t simply throw all your energy into the one day and hope for the best. You’d train yourself by starting with a small run and as your fitness improved, you’d increase the distance. Once the day of the marathon arrived, you would feel confident that you had prepared yourself and that confidence offers the motivation to finish. The same method can be applied to debt.
When you find yourself with multiple debts, start at the bottom and make your way through. It may not be the fastest way to tackle debt, but it’s a proven method for staying on track and each time you achieve a goal, you feel a surge to finish your goal of being debt free.
Let’s say you have five debts you are trying to juggle. Your debts are worth $10,000, $7,000, $4,000, $2,000 and $1,000. Focus your attention on the last one, the $1,000 debt. This will be the fastest and easiest one to pay off. To do this, pay just the minimum on the other debts and any extra you have, throw it on your smallest. Before you know it, you’ll have wiped the debt completely, leaving you with just four. Apply the same tactic to the $2,000 debt and soon enough, that one will be gone too.
A paper published in the Journal of Marketing Research suggested that “the perception of progress toward a goal has a strong and motivational effect on goal pursuit”. In other words, a too daunting task can result in a lack of motivation and without motivation, debts are rarely wiped. By setting a realistic goal, progress is seen and motivation kicks in.
But what happens if you’re still struggling to pay off even the smallest of debt?
Tips for finding cash to pay off debt
Refrain from beating yourself up: Don’t be too hard on yourself. Getting into debt is an easy thing to do and many people find themselves in the same situation. Try not to concentrate on why you got into debt, concentrate on how to get out of it.
Trim your budget: Write a list of all your expenditures or go through your bank statement line by line. If you double up on lunch with friends, try cutting one of those lunch dates out next month. Instead of getting your lawn mowed every two weeks, borrow your neighbour’s mower and do it yourself. Remember, every dollar counts.
Work out ways to earn extra cash: Do you have a spare room you could offer to a student or could you pick up an extra shift at work? Perhaps it’s time to look for a second job?
Make a goal just above what you know you can reach: If you know you can afford $300 a month to pay towards your debts, set a goal for $350. Once you’ve reached that, increase it again the next month.