Debt creep. It sneaks up on us, just like the thistle that has appeared in my flower bed. The thistle started out quite small, I didn’t really notice it for quite some time, then it poked its head out in between the flowers and I thought to myself, “I really must go and pull that out”.
As usual I got busy with other things, plus I don’t really like gardening so it was easier to just ignore it for awhile.
But of course it has continued to grow, and is now a monster thistle and is starting to consume my thoughts about how I am going to get rid of this thing without getting hurt or destroying the flowers around it.
Debt is just like my thistle, you can ignore it for quite some time, but because of interest it will continue to grow and if left unattended it will begin to consume your life and cause you large amounts of stress.
So in one way or another it does have to be dealt with.
When I was wearing my accountant’s hat, I would tell clients they had to pay off the high interest debt first. It was all about what it was costing to have the debt.
Now with my Money Mentor hat on, I see debt from a completely different angle. Debt has nothing to do with interest; it is all about the emotions. It was our emotional decisions that got us into debt in the first place; the interest we are paying is the cost of that emotional choice.
So rather than chip away a little bit at all the debt you have, focus on what you can pay off as quickly as possible and get rid of something
Here is what you need to do
- List all of your debt from the smallest amount outstanding to the largest
- Next to the amount owing, write down how much you are currently paying per month on each debt
- Restructure your payments so you are paying the minimum amount you possibly can on all but the smallest debt and see how much extra you can apply to that one smallest item. You may need to talk to your bank or Credit Card Company to negotiate a payment plan.
- Finally work out how quickly you can clear one debt completely.
The reason you want to do this, is to trick your brain into thinking that paying off debt is as much fun as the buying that you did to get into debt in the first place.
Also completely repaying one debt will give you a feeling of success and empower you to do it again with the next loan.
If you would like some more information on how to trick your brain into thinking repaying debt is fun, then drop us an email.