Do you have a debt free date?

Credit is seductive. Credit card companies spend millions of dollars to convince you to borrow their money. They have catchy slogans like:

• It’s everywhere you want to be. (Visa)
• There are some things money can’t buy. For everything else there’s Mastercard.
• What’s in your wallet? (Capital One)
• Don’t leave home without it. (American Express)

It’s no wonder that credit monitoring agency TransUnion is predicting the average consumer’s debt will reach an all time high by the end of 2014.  It’s also no wonder that if you google debt stress you’ll get over 69 MILLION results

But there are things you can do right now to lower debt and debt stress.

First and foremost decide that debt repayment is your priority. It doesn’t mean it is your only priority but it has to rank high and be consistent.

Second, tackle one debt at a time. A popular way to do this is often called the snowball method. Imagine a snowball starting small and rolling down a hill getting bigger as it goes. You begin with a small manageable payment on your smallest debt that exceeds the minimum payment, and make the minimum payments on your larger debts. When the smallest debt is paid you apply the payments you were making on that debt to the next highest debt along with that debt’s minimum payment. The idea is that as the smaller debts are eliminated you have more money available to make bigger payments on the larger debts.

You are probably thinking it would make better money sense to pay off the debt with the highest interest rate first, and that is usually what we advocate, but what’s most important is making progress. Debt has almost as much to do with emotion as it does dollars. If eliminating smaller debts first, regardless of interest rate, feeds your momentum and sense of accomplishment then you are more likely to stick to your plan.

Third, establish your debt free date. Write it on a calendar and get excited about it.

How do you establish a debt free date? With our Money Coaches Debt Free Calculator.

It’s a fairly straight forward Excel document that will allow you to enable editing. You will need to fill in the yellow areas with your financial numbers (be sure to update the default start month and start year).  If you have credit cards with promotional rates for a certain period of time, the calculator will adjust for that if you add that info to the blue promotional rate area. You can refer back to this calculator as you progress with your plan, it even includes the option of adding extra payments should that be possible from time to time.

One of the keys to personal money management is engagement with your money. Trouble starts when you go on financial autopilot and lose track of how much you are spending. Money confidence is replaced by a vague unease. The longer you are disengaged the higher the stress climbs.

If you need help to create a plan and re-engage don’t hesitate to contact one of our coaches. Because we have a catchy slogan of our own: Money Coaches Canada – Taking the Worry Out of Money.

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