Managing Your Money

Paying down debt the healthy way

When you're trying to get out of debt, it can feel like the road to financial fitness is just beginning. And while reaching your goal may not be easy, it can be done with some determination, the right tools — and the following tips adapted from the Crucial Skills Newsletter.

Reduce monthly payments

Monthly expenses like housing, transportation, and utilities are a fact of life — but there may be ways to reduce the amount of money you're dedicating to these costs each month.

Reduce your rent or mortgage. Take a look at how much you're spending on your living space each month. If you're able, you might consider refinancing your mortgage to lower your payments. If not, there are other steps you can take, like renting out a room in your house, downsizing to a smaller house or apartment, or moving in with a friend or relative.

Lower your transportation costs. We all need a way to get around. But if your vehicle is costing you too much each month, you have alternatives: You could sell or trade in your current vehicle and purchase one that requires less gas, fewer repairs, or cheaper insurance. You could also consider relying more on public transportation or bicycling.

Cancel non-critical services. Take a hard look at your monthly subscriptions and decide which are must-haves and which are just nice to have. For example, perhaps you could cancel cable TV and subscribe to a streaming service instead. Maybe you could reduce your cell phone plan. Or, perhaps you have magazine or newspaper subscriptions you could cancel.

Sell unnecessary assets. Things like boats, power toys, vacation homes, etc., are fun to have, but if they're contributing negatively to your overall debt, they may not be worth the extra cost. Consider selling these assets if possible.

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Make impulse buying more difficult

As you work toward reducing your debt, savvy shopping and establishing boundaries can go a long way. For starters, you can cut up or cancel your credit cards so you don't reach for them when it's time to pay the bill at dinner or the grocery store. Additionally, making certain tempting locations “out of bounds” may make it easier to avoid impulse buying; for example, stop going to particular stores or malls, stay off of eBay, and avoid other online retailers that have triggered irresponsible purchases in the past. Finally, give yourself some parameters when you do head out to the store: Never shop without an actual shopping list, and never buy items that aren't on the list.


Keep score

It may seem silly, but sometimes having a visual representation of the progress you're making can help make it easier to stick to your plan — especially during those times when it feels like your goal is still far away. To help stay motivated, keep a visible scorecard or chart that shows your progress and update it every day or every week. That way, you'll be able to see without a doubt that you're moving forward toward your goal.

Add another paycheck

If you have the extra time, one thing that can really help with your debt reduction goals is adding some extra income through a second job. Whether it's freelancing, driving for a ride-share app, or taking on a part-time position, an evening or weekend job that brings in even just $100 a week might be enough to give you the extra margin you need to tackle your debt even faster — while also giving your budget a little breathing room.


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Find ways to stay motivated

When you're paying down debt, it can be easy to lose motivation or fall victim to shame or frustration — especially if you can't remember where your money went in the first place. Motivation works best when you focus on the future, on where you want your hard work to take you. Here are a few ideas to help you stay motivated.

Re-frame your goals

“Get out of debt” is a pretty broad goal to work toward. So instead of one broad overarching goal, think about different ways to look at your debt reduction. Here are a few to consider.

Set mini-goals. One way to stay motivated is to select a very specific debt reduction target, like paying off your highest-rate card or a student loan, and focusing all of your extra dollars on that goal alone. Then, once that mini-goal is accomplished, you can move on to the next one.

Prepare for something specific. Select a very specific purchase that your debt reduction target will make possible. Don’t make this an “optional expense” like a vacation; instead, make it mandatory, like dental work, tires, or a replacement car. This target will be your North Star, a motivator and a guide when your mood is dark. Think deeply about what will happen if you don’t make your savings goal — if you can’t get your dental care or new tires, or if you can’t afford medical care for your loved ones.


Create a personal mission statement

Write down your saving and spending plan and note why it is important to you. Have every family member sign it, then keep copies you can see and read when you feel tempted to overspend.


Make it a game

If you feel yourself getting discouraged or frustrated by your debt reduction efforts, why not try to have some fun with it? Create a savings game for yourself with a reasonable challenge, clear rules, a social interaction element, and immediate feedback. Here's an example to get you started.

Set a weekly goal. Which goal you choose is up to you; for this example, perhaps you could decide on a set figure to pay toward a credit card each week.

Establish clear rules. Maybe establish different rules each week; for example, “This week our payment has to come from new money one of us has earned. Next week it has to come from saved money, and it has to come from our food budget.”

Use cooperation or competition. For example, “This week, we’ll cooperate to jointly achieve our goal. Next week, we’ll compete to see who can reach their part of the goal first.”

Give feedback and fabulous prizes. Make a big chart that shows your progress. Create magnificent, but free, prizes like paper crowns and towel capes for the Sultan of Savings. Celebrate your very real achievements by writing notes to each other and putting them into a scrapbook. It might sound silly, but your hard work deserves to be celebrated!

Learning Center articles, guides, blogs, podcasts, and videos are for informational purposes only and are not an advertisement for a product or service. The accuracy and completeness is not guaranteed and does not constitute legal or tax advice. Please consult with your own tax, legal, and financial advisors.