How are you keeping yourself motivated to get out of debt?
Are you making the minimum payments and just hoping there will be some leftover at the end of the month to put towards your loans? Hopefully, these following 5 ideas will help you get organized and stay motivated.
1. Decide which payment you are going to tackle first.
This is crucial in being able to get out of debt. You are going to want to select one payment to focus on and put all your extra money towards. This will allow you to be less distracted and visualize yourself paying it off.
Trying to pay off more than one debt at a time is a lot like multitasking many different things at once. Not only is multitasking bad for you, it actually is counter-intuitive to getting anything done. I used to think it was the only way to get everything done on time. But working on more than one objective means that while you may be making progress on three things at once, you aren’t actually completing any of them.
Pick a debt and focus on it. Live it, breathe it, and visualize yourself never having to call those people again.
Once you have decided which debt you are going to focus on, make sure it is front and center in your life.
Write down the name of the debt and your remaining balance on a piece of paper. Below the number, write down a couple of words or phrase that will immediately remind you why is it so important to get out of debt. Here is what mine looks like:
As you make payments you can cross off the number and write down your new total. This helps motivate you to pay as much as you can to get that total lower and lower. Physically being able to change that number will make you feel awesome.
3. Make sure this is front and center in your life.
Tape this piece of paper to the wall. Take a picture of it and make it your background photo on your phone, computer and/or tablet. Put a post-it on your bathroom mirror so it is one of the first things you think about each morning.
Choose the method that fits your needs or figure out more creative ways to make it stand out in your life.
Focusing so intently on your goal will help you reach it faster. When your friend texts you and asks you to come check out the new “foodie heaven” that just opened in the city, you’ll be reminded of your goal.
The more you sacrifice now, the less amount of time you’ll have to sacrifice in order to be out of debt.
More intensity = less “in debt” time.
4. Set up calendar alerts to remind you of your goal.
I currently have quite a few of these alerts set up to keep me on track. These are the alerts I have set up in Google Calendar at this point:
An event set up to alert me when a payment is due.
An alert set up a few days prior to it being due just in case I somehow forgot to send the payment already.
A recurring reminder every week or so that reminds me why I am pushing myself so hard to get out of debt.
Putting your payment due dates into this calendar is helpful because Google will send a “push” notification (seen in upper right-hand corner) to your phone or computer. These are great reminders and have definitely saved me some late fees and headaches.
Here is my personal Google Calendar for payments and bills:
5. Write down the first thing you’ll buy once you make your last payment.
I know this sounds kind of contradictory – I keep telling you to save money, change your mindset and learn to live below your means, but it is also important to have something to look forward to.
Having a goal in mind will help you tremendously in order to make such a drastic change in your life. Try not to go overboard with this one, but make sure to have fun with it as well. By now you should know that a brand new car should not be the thing you are going to buy once you are out of debt.
I will be turning 30 when I make my last payment, so I plan on taking my special someone out to dinner and then having a fun night out on the town with friends. What will you do once you are out of debt?
Not Just For Becoming Debt-Free
While this article was written to help you get on track and out of debt, did you notice what else these steps are good for?
Giving you the push to accomplish any goal.
Choose a goal that is long overdue – make it visually important and a top priority. Then set up reminders to help keep you on track. Finally, create a milestone you will have accomplished once that goal is complete.
Getting out of debt requires you to have a system in place, much like accomplishing any other task in life.
Setting goals for yourself helps you plan and strategize what you want out of life, and setting yourself up for success is crucial to achieving them.
Do you have any suggestions that help you accomplish your goals? Leave a comment below to help your fellow Bright Cents readers.
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When I was 22 I landed my first “real job” after college. I was making more than the $2.33 an hour plus tips I had made at all of my waitressing jobs, and it felt great to have a stable income for the first time. I was just starting out, and I wanted to do it right. While I knew very little about my student loans at this point, I had heard so many times that the best way to pay off student loanswas by paying more than the minimum payment. So that’s what I did – at least for a few months.
Little did I know, I was falling into a trap.
I owed about $52,000 to one of my student loan companies. My minimum payment each month with them was $267. For the first few months in 2011, I increased my bank draft to $300 a month, which was $33 dollars extra each month towards this balance. I felt great about paying more than the minimum payment and thought I was doing the right thing.
After 8 months of paying extra, I went back to making just the minimum payment. I guess you could say I was no longer motivated to pay these people more than I had to. This was me being completely naive – I didn’t realize at the time how much more you pay by just making the minimum payment, but I digress.
About 2 and a half years later, I called in to make a payment. I spoke to someone who told me extremely upsetting news. The extra money I had paid in 2011 had been spread out across each individual loan and payments weren’t being applied until that amount could fulfill a minimum payment.
I had five separate loans with this one company. Each loan has its own minimum payment amount, accrued its own interest, etc.
Here’s the catch – the student loan company would only apply that extra payment once it was enough to make a minimum payment for that specific loan.
The chart below may help explain this better. The last column shows the amount of my extra $33 that went towards each loan every month.
Extra paid each month
When that last column was finally enough to make the minimum payment on a loan is when they would apply another payment to that specific loan. So for the loan #1 the minimum payment is $88.13, but after 8 months of making payments, the extra amount was only $82.56. Since it wasn’t enough to meet the minimum payment, that money just sat there. For 2 and a half years it sat there – in the student loan company’s banks accruing interest for them, and leaving me in the dust.
The woman on the phone explained that even after 7 or 8 months of making extra payments, none of that money had been applied to my loans because it had not grown big enough to satisfy the “minimum payment” amount on any of the loans.
I was so frustrated, angry, and upset that no one had ever explained this to me this before. I felt so dumb, naive and completely out of touch with reality. None of my loan statements made any of this clear and none of the other people I had spoken to had felt they should divulge this information.
I realize that this only equates to about $264, but that was a $264 payment that could have saved me interest payments over 2.5 years. It just felt like a complete stab in the back. Here I was, this 22-year-old trying to do right and pay back my student loans in less than 30 years, and the loan company was playing tricks on me.
NEVER AGAIN would I let myself be betrayed by these people. NEVER AGAIN was I going to let other people decide my future and what happened with my hard earned money. I was going to figure out what was going on and get out of their grasp as soon as possible.
A few months later and here I am, writing this blog in hopes of reaching the people who didn’t have this breakthrough yet. Student loan companies are not honest, they are not up front, and they are not here to help us get out of debt. They want us to stay in debt and earn them more interest.
So I want to thank you, student loan company from South Carolina with an apple in your logo, for screwing me, and for starting this never-ending motivation I now have to get out of debt. Thank you, for getting so far under my skin that I created this website to help make sure other people don’t fall for your tricks. I have lowered my student loan jail sentence to 36 months and I cannot wait to get rid of you.
So what is the best way to pay off student loans? Paying more than the minimum but calling to make sure they apply the extra payment correctly – and then checking online to make sure your payment reflects this correctly. Pick up the phone and call them.
More recently I have begun to grow up and take responsibility for the ridiculous amount of debt I have been so good at accumulating. Every chance I had outside of work, I was digging a bigger hole for myself to crawl out of – hanging out with friends which almost always included a few drinks followed by a late night stop at the local diner. Every day was a special occasion that warranted a meet up at the local bar. Everyone was doing it. We worked our asses off and felt like the bar crawl after was well deserved!
Trust me, it was fun while it lasted and I’m not here to make you feel bad if you’ve done that yourself. I had a blast and met some amazing people (others, not so great). I would probably do it all over again – but I’d bring my own road sodas as opposed to spending $3-$5 a beer. 🙂
I was just living the “normal” life to everyone around me, and it just seemed like the way things were done. I had no one telling me otherwise and I seemed to fit in pretty well. And because I wasn’t exactly a fan of math and looking hard at numbers, I just paid the minimum payments shown on my statements and forgot about them for another month. Little did I know I could have paid off my loans and been out of debt by now…but hey, math just isn’t that fun, right?
At the age of 26, I had started realizing I couldn’t keep living life this way, but I still hadn’t really done anything about it. How I really got started? Well, I got sick of listening to the music on the radio. Yep, that’s where it all began. Listening to the same songs, every morning, over and over again was really annoying me. So I went looking for something else to listen to on my way to work and started listening to e-books and podcasts instead. What a productive, grown-up way to spend my commute! It got me excited and motivated to see what else I could change. I was listening to podcasts from Suze Ormanwho is a special lady and definitely knows what she is talking about. But I just got so un-motivated when I saw how long I would be in debt. Aside from Suze, I heard so many conflicting ways to pay down debts, but it was always too overwhelming.
One night I sat down with my computer, opened a blank Excel file, and spent the next 4 hours playing around with the numbers. I went over every possible scenario trying to figure out what the best way to pay down my debt was going to be. I looked at all of my debts in one place, how long each would take to pay off, the amount I could really be using to pay down my debt each month, and learned how interest rates were really calculated for each debt. It was a lot of work, but I ended up with the beginning of my “modified debt-snowball.”
I was determined to figure out a way to pay off everything without spending the next 30 years doing so. And I did. It just took a lot more of my income each month going towards it and was going to take a ton of determination.
No more happy hour after work, no more impulse buying, or traveling all over creation “just because”….basically, no more spending money I didn’t have. What a concept! And I figured out I would only need to do this for about three years, and then I could go back to spending my money how I wanted. I can do that! 36 months of spending next to nothing, so I could live a “normal” life at the end of it. That sounds way better than 30 years in debt, doesn’t it?
I got really excited and decided I wanted to share my story, and prove that it could be done. So here I am. I’m counting on you guys to help me along the way too. Debt and finance are not something we can figure out overnight, so don’t expect me to know everything either.
In the next few weeks, I am going to figure out a way to share that Excel sheet system with you so you can have somewhere to start. After all, getting started was the hardest part for me.
I know you all have heard someone tell you about how they make extra money by using a credit card to rack up points or you have at least seen a commercial advertising these awesome “FREE” prizes and cash back offers. I also know that this sounds like a great idea, and you might even start to think you are getting one over on the credit card companies, right? Sorry to break it to you, but do you really think that these multi-billion dollar banks are dumb enough to let you beat them at their own game? No way. They wouldn’t be a multi-billion dollar bank if they did. But they know that as Americans, many of us are dumb enough to think that we are the ones coming out ahead in this deal, and they play on your emotions to keep you thinking that way.
Most credit card companies will give you one point for every dollar you spend, with “bonus” points in certain categories which may vary month to month. Think about that. You need to put $1,000 on your credit card to make a measly $10. Is it really worth it to put yourself in jeopardy of falling into debt for a minimal amount of “cash back”?
Not only do credit card companies charge the retailer a percentage of each sale to let you use their card, they also know that if you use that card and carry the balance for a few weeks, they are going to make money off of you as well. Pay your bill late and they make even more money. They can charge late fees and even increase your interest rate after just one late payment. Sadly, this is how a lot of people end up in a situation where they need to declare bankruptcy.
I know I will hear at least one of these so I will address them now:
“I pay it off every month and never carry a balance.” Be honest with yourself. Do you really? I dare you to go back and check your bank statements to see what your recent balance was over the last six months. I know it’s easy to think, “oh it’s only $50, i’ll pay it off the next time I get paid.” and then your phone breaks, or your car needs and oil change and it’s just easier to leave that $100 on the credit card so you can deal with your “emergency”. We’ve all been hit with at least one late payment fee, overdraft penalty or interest charge. It’s okay to admit it. There’s no need to lie to yourself about how responsible you are with your money, we all have our faults.
“But it builds my credit score.” I know that a lot of you are concerned with keeping your credit score up so the little credit score demons don’t come knocking on your door. Newsflash: they don’t exist. You are not going to be put in jail or be forced to get a tattoo on your head that says your credit score is less than 750. You know what kind of demons will come at you if you get in too much debt? The bankruptcy demons who will take your house, your car and your sense of security. The only people who care about your credit score are the ones trying to get you into more debt: the loan companies. In addition, carrying a balance does not benefit your credit score as you might think. Using the card once in a while to buy a stick of gum should do the trick.
“I use the points to go on vacation or buy Christmas gifts every year.” Do you know that someone with a $5,000 credit card balance with a 16% APR who pays $125 a month towards their debt will end up paying $2,000 in interest alone? That ends up being a 40% return on investment for the credit card companies. Not to mention, $2,000 would really be put to good use for a vacation, don’t you think? But, do you know who just earned a vacation fund out of this deal? The credit card companies. If you were to save $125 a month, you’d have the $2,000 in just sixteen months.
The 2014 U.S. Household Consumer Debt Profile shows the average credit card debt of an American household is $15,191. While this may not seem like a groundbreaking number, you have to realize that there had to have been a lot of people on the high end of the spectrum with well over $15k in credit card debt in order for this number to be an “average”. Thankfully, there are also people with no debt who bring that number down. Let’s try not to be the ones who send that statistic up higher next year.
While a small percentage of people actually do pay their debts off every month and cash out their points for real dollars and cents, the majority pay their bills late, carry balances for months or years, or end up in financial hell.
Use your debit card to make purchases and save yourself a lot of mental stress when the credit card bill arrives, because your’s will be $0. Any checking account will do, but if you’re reading this you’ve probably been trying to get the most out of your money. I do this by having a high-interest checking account from Capital One 360(affiliate link) which pays you about .20% interest. Now I know this isn’t a huge amount but it is better than no interest which is what you get from most other checking accounts. I have used them for a few years now and love their service as well as the user experience they provide online. There are some other companies who have high interest checking as well and I think this is something to look into.
Now, if you still think you’re going to beat the companies and squeeze them out of a few bucks, make sure you at least take the cash back and don’t settle for the crappy gift cards. All of the ones I’ve seen not only cost more points than you would spend in cash (e.g. 5000 points for a $25 credit card), but I can guarantee that the companies only pay a fraction of that $25 face value for the cards. The cash back option is usually going to get you the most bang for your buck.
Just remember what they say in Vegas, the house always wins.