It’s easy to feel overwhelmed or become discouraged when going after a personal goal, like getting out of debt. Stats bear this out: Nearly half of Americans make New Year’s resolutions each year, yet only about 8% actually succeed, according to a University of Scranton study published in the Journal of Clinical Psychology.
Don't look at the dismal numbers and decide to throw in the towel. Tackling debt means changing your habits — and then taking baby steps along the way.
“It’s really important you don’t make [paying down debt] so daunting that it’s impossible to succeed,” says Scott Mazuzan, CFP®, a private client advisor at F.L.Putnam Investment Management Company in Portland, Maine.
“If you wanted to be a runner, you wouldn’t run a 10K every day, seven days a week, because you would hurt yourself and then give up, right?” Mazuzan says. “So you set goals that are small enough that it’s almost impossible to fail — like $10 more [than] the minimum payment to start with." Then, inspired by your success, "maybe notch it up the next month and the month after that.”
No matter how determined you are, your resolve is bound to weaken. Arm yourself with these motivation boosters.
Strategy #1: Know Why You Want to Be Debt-Free
The benefits are obvious: Your credit rating will go up, and you'll no longer get scary bank statements. But identifying the deeper, more personal reasons driving you will help.
Start by asking yourself, “What’s important to you about being debt-free?” says Saundra Davis, a financial coach and executive director of Sage Financial Solutions in Pinole, California. "How will your financial life become more focused?”
Let’s say your primary aim is to get closer to buying your dream home in the next five years. Does owning a home represent security? Something to call your own? A place your children can return to no matter where they are in the world? Knowing what erasing debt really means to you gives it more meaning.
Strategy #2: Keep Your Goal In Sight — Literally
The old photo-in-the-wallet trick really works: Having a visual on hand that represents financial freedom can keep you motivated. "It's a mental reminder of why you’re setting limits on your spending," explains Olivia Mellan, a Washington, D.C.-based money coach, psychotherapist and co-author of the book “Money Harmony: A Road Map for Individuals and Couples.”
Make the background image on your desktop or cellphone a snapshot relating to your goal — maybe of the beach in Bali you're dying to visit one day. Create a Pinterest board of “Money Goals” with captions reminding you what each means to you.
Strategy #3: Track Everything
Maintaining close tabs on what you save and what you spend doesn't sound fun. But knowing that you're sticking to your plan and seeing your debt decrease month by month is hugely inspiring.
Resources like Vertex42 and PowerPay offer personal finance spreadsheet templates as well as handy credit card payoff calculators. Budgeting apps or online resources from your bank can help you track expenses, payments and deposits.
Set up check-in points (daily, weekly, monthly or quarterly), so you can hold yourself accountable, measure your progress and make adjustments. When your spending are habits laid out before you, it’ll be much easier to pinpoint where you need to make changes.
As you track your spending, note how you feel about each purchase, says Mellan, who also recommends maintaining a handwritten spending diary. (Think: “I treated myself to fro-yo because I’ve had a hard week.”) Reflecting on the emotions behind your spending can reveal unhealthy money patterns.
Strategy #4: Celebrate Small Milestones
Made an extra payment last month? Passed the halfway point paying off one card? Congrats — now give yourself props. Acknowledging small successes gives you something to look forward to every time you reach a milestone.
“I always tell people not to be afraid to enjoy themselves, because if you just focus on throwing every dollar toward a pay-down goal, you’ll be miserable and you’ll probably give up,” says Mazuzan.
To this end, Mazuzan recommends starting a special “rewards” fund, which he likens to a credit card rewards program. So for every dollar over the minimum payment made towards your debt, send 1% cash back to the account — and use only that money to pay for your small splurges.
Strategy #5: Stop Beating Yourself Up
According to a 2016 report by NerdWallet, the average U.S. household owing money carries $16,061 in credit card debt — translating into an overall total of $747 billion of debt among American consumers.
In other words, you’re not the only one with a balance problem. And it’s almost guaranteed that you'll have occasional slip-ups, either via last-minute emergency expenses or a moment of weakness.
“What happens with people is, as soon as they hit the first bump — think of it like a New Year’s resolution about exercise — as soon as you break your cycle, as soon as you fall off the wagon, if you will, the shame builds up so much that it’s hard to recapture your momentum,” Davis explains.
Don’t feel guilty and don't put yourself down. Remind yourself that no one is perfect and then reevaluate your plan. Do you need more outside support? Should you adjust your timeline or pay-down amount? Are you truly ready to tackle your debt? Course-correct, cheer yourself on and keep going, says Mazuzan.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.