Getting Out of Debt: Focusing on the Little Things

Pay off your credit cards to get out of debt. It's not as simple as it sounds. It's not just a matter of fiscal responsibility or financial priorities. Getting out of credit card debt will take a major behavior overhaul. As I discussed in my previous post, financial habits that took years to develop will take time to change. Adjusting your behavior will work best if you make small intentional choices, one at a time. The choices you make will become habits; your habits will lead to a lifestyle.

To pay off your credit card debts, the first small choice you should make is to toss a piece of conventional financial wisdom. Traditional advice dictates that you should identify the card with the highest interest rate, pay the minimum to the others, while paying off that high interest card first. A successful alternative is the debt snowball which urges people to pay off the smallest balances first, regardless of interest rate. Then, you to take the amount of the previous payment and add it to the minimum payment of next highest balance. Continue this until your cards are paid off. This allows you to rapidly experience success, and because success feels good, you build a habit. It may not make sound mathematical sense, but remember, the point is behavior modification.

Second, carve out a little money every month to pay your balances down. Little amounts add up quickly. For example:

The average American drinks two soft drinks a day. Cut those drinks out for an additional $60.

Use coupons, and apply the savings to debt.

Skip a meat entree once a week. According to the USDA, produce costs an average of 71 cents /lb. while beef costs $4.15 /lb.
These amounts sound modest, but consider the following: a credit card with a $1000 balance and a 14% rate will take 76 months to pay off at $20 a month, 55 months at $25, and 35 months at $35. In addition to the savings, by making sacrifices, you are making intentional and tangible choices to change.

Third, monitor your progress. Get obsessed with cutting your credit card debt. Begin to filter your choices through the lens of your financial health, and you will to view things differently.

On a calender, mark every day that you do not use a credit card on a frivolous purchase.

Write the balance of your current card (the one with the extra payment) and post it on your computer monitor, rear view mirror, or TV.

Put the change you save from coupons in a jar; watch it grow and consciously use that amount to make an extra credit card payment.

Cutting your credit card debt will be one of the most financially and mentally rewarding experiences, but it cannot be done quickly or easily. Reordering priorities and making conscious choices will eventually pay off with a financial lifestyle built on healthy monetary habits.