Finding creative and inspirational ways to help you repay your debt can keep you motivated and moving the the right direction.
One of the sad things I found when helping my brother-in-law get out of debt, was that he couldn’t even remember where he spent most of the money. Without knowing where the money went, it’s hard to make the connection to your daily life and your debt.
Emotional Debt Payoff
In How to Pay off Credit Card Debt, we discussed some common methods to pay off debt, including paying the highest interest first or the smallest balance first.
Here’s a different approach, one that helps you make the emotional connection to your debt.
- Itemize. Go through your debt to find out exactly what you purchased.
- List Amounts. Make a list of each item with the amount.
- Rank Your List. The first item should be the one that bothers you the most. Now that you know you’re paying 15% interest to sit on your new living room couch each day, how does it make you feel? If it’s lousy, pay it off first. Or if you have $100 worth of charges from dining out, and it kills you to know you’re in debt for food that is gone, make that first on your list.
Here’s an example of what your list might look like:
- Dining out: $100
- Lawn Mower: $200
- Furniture: $900
- Kids Toys: $50
- Clothes: $600
- Interest and Late Charges: $250
I actually used this strategy when I took money out of savings to cover my last maternity leave. I wanted to build back up the savings, but just looking at a $10,000 number wasn’t very motivating.
When I put it into the perspective of purchases, I was able to work much harder to build back up our savings. You can see how the strategy would work for either replenishing a savings account or paying down debt.
While we can all say that it’s purely math and money, the truth is that debt takes an emotional toll on your life; especially now, when many people are feeling the effects of the current economy. The more emotional baggage you can shed, the better. By dividing your debt into individual purchases and paying off the debt that disturbs you the most, you’ll be happier.