3 Easy Steps to Pay Off Debt
Having debt can affect our mental health; it can make us feel worried, anxious, and depressed. Over time, these symptoms are overwhelming and many individuals avoid dealing with their debt to avoid dealing with their reality. However, avoidance can turn into a vicious cycle of more worrying that over time leads to feelings of hopelessness and more anxiety.
This is why it's important to stop avoiding for short-term relief and confront the issue for long-term gain.
The first step in the process is to calculate how much debt is owed. This part is the most anxiety-provoking, but it's important.
Try to make your environment as relaxing as possible when following these steps. Light some candles, drink wine, take a bubble bath, etc. Mint is a great app because it can track total debt for you, along with total net worth, but if your prefer paper and pen then write it all down.
The second step is to develop a plan to tackle the debt. The order in which you tackle debt isn't as important as the process. Some financial experts argue it's smarter to start with highest interest debt first, and mathematically that makes sense. However, it can be much more motivating to target smaller debt first.
Since dealing with debt can be overwhelming, it is important to quickly feel a sense of control and accomplishment. Paying off smaller debt first may then be more effective since many individuals who try to tackle debt become discouraged.
A study in the Journal of Marketing Research found that individuals were more motivated to finish a task when they started smaller or easier tasks and then moved on to largest or more difficult tasks. Their motivation also increased the closer they got to finishing the task. The authors of the study found that “Winning what are known as ‘small victories’ by paying off small debts first can give consumers a real boost in eventually paying off all their debts. The reason is that meeting a small goal provides the motivation to then meet a larger goal.”
It also helps to focus on the smaller amount of debt you are tackling versus the total sum. For example, paying off a $2,000 balance on a loan versus $100,000 total debt. Otherwise it can be easy to convince yourself that it is ok to make unnecessary purchases when you weigh it against a large total amount due. For example, "what's $500 more, I already owe $100,000" versus "I only owe $2,000 on this loan, this $500 purchase is a lot".
The third step is to check in regularly. Schedule a time every week or every month to check in on your progress. If you are doing this with a partner or friend, set up a money date and try to make it fun and relaxing.
Celebrate each goal with something small that you enjoy such as a movie night, a pedicure, or a night out with friends. If you try to completely deprive yourself from small splurges once in a while, you are much more likely to end up failing. Be realistic with your plan and use it to motivate you to stay on track.
Having self-affirmations or an image of your goals visible can also be motivating. Visualize what your life will look like when you achieve this goal, find a picture that captures that feeling, and put it somewhere visible to remind you of what you are working towards.