Action Tip: Develop a way to pay off your debt. Here are four possible ways to pay off debt.
- Feelings – You pay on the one that bothers you the most. This one is great to feel better when you make the payment, but feelings ebb and flow. One that bothers you today, may not be the one that bothers you the most tomorrow. So you may feel good one day then stressed out again over another balance. This is a wack-a-mole approach.
- Smallest to Largest – This deals with your behavior and your actions. You may have stronger feelings against a larger balance debt, feelings change day to day. This method gives you the satisfaction of paying off a smaller, annoying balance. You know you accomplished a milestone. This is a disciplined approach and you know where you are going. You really see progress and can map out your path.
- Highest Interest Rate to Lowest Interest Rate – This one deals with your mind, your rational thinking which makes it less powerful. Mathematically you may pay the least interest this way, but you feel less emotions doing it and don’t viscerally feel as much progress this way. It’s more of an intellectual exercise and progress without experiencing milestones.
- Pay a little on them all – This is a shotgun approach. All balances go down together. You really don’t feel much in the way of paying something off because they are all reduced together.
What way have you used and what’s worked best for you?