Every Month You Decide This Again

You are going to finally tackle your debt problem. You're going to make a plan, follow through on it. You're not sure how long it's going to take, but you are determined to stick with it.

And you start. For a few days. Maybe weeks. But by the time the next bill comes, your overall balance hasn't really budged. And so you decide to be more serious and disciplined. But…
It's Not Working, and Problems Are on the Horizon

This is like a diet that doesn't quite happen. It's not all about the technique, it's about the psychology. Psychology holds the key to successfully getting out of debt. Let's explore how to use it in a powerful way.

How to Create Real Momentum

Once you have a concrete sign of progress, your psychology changes. You feel a sense of accomplishment, and it can be thrilling. Or, it may be a feeling of relief. Either way, it's a good feeling. It creates momentum towards achieving your goal.

But how do you achieve that progress when confronted with a mountain of debt? What is the right approach? There are two main factors in creating a momentum-based debt ending program. They are knowledge and priorities.

Do You Make This Mistake in Your Financial Planning?

Surprisingly many people do not properly track their finances. They come to the end of the month, get the credit card bills, look at their bank balance, and realize that they can't put a dent in it.

You will be surprised to know that knowledge and awareness can save you money. If you know exactly how much you spent last month, you will almost automatically check yourself before laying out a lot of money this month. Keeping score is a great motivator to improve your performance. Humans are built to rate themselves.

So the first thing you must always do is get your accounting in order. Then you can budget yourself to maximize the money available to pay down debt. You will be proud of reducing your spending over the previous month, and that is a perfect use of momentum to continue to save.

Having a full financial picture, best done in a dedicated software program, takes the guesswork out of reducing your debt.

How to Prioritize Paying down Your Debts

If you are able to pay more than your monthly minimums, you have a choice to make. Do you spread the extra money over all the debts, or do you focus it on one or two? I believe there is a correct answer, and the correct answer is focus it!

The famous Snowball Method is so effective because it uses psychology and momentum. You write down all of your debts, and order them based on the overall balance. You decide to pay the minimums on every debt except for the smallest one. Every extra penny goes to that debt, until it is paid off. You do not use that card during this period.

Then, once it is paid off, you go to the next smallest debt. You can choose to close the card that you've already cleared, or, if it has the lowest interest rate of all of your other cards, you can begin using it for basic necessities only. But you must commit to paying that card in full every month from now on.

But Don't People Fall Back into Debt?

Yes, that can happen. That's why making a permanent change in the way you use credit cards will help avoid falling into the debt hole again. How to do it?

I recommend keeping only two cards active. One should be used exclusively for the basics of living: groceries, transportation, utilities. The other should be used only for optional spending, such as entertainment, clothing or home improvements, new appliances that could wait.

By doing this, your basic necessities credit card will be there for you. But whenever you feel the urge to take out the other one, you will think twice and thrice. Again, we are using psychology and momentum to cut your spending and keep you moving forward.

The Perfect Combination of Skills to Clear Your Debt

So by using proper planning, accurate scorekeeping, and momentum building techniques, you will be well on your way to debt freedom in a relatively short time. It requires discipline, but by using these techniques and properly prioritizing through the snowball method, the discipline will get easier and easier.

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