1. Look for holes in your pockets
Start by taking a snapshot of your finances: your earnings, regular expenses, credit card debts, bills, and anything else that sees money changing hands. Write it down, especially if you’re juggling more than a few bills and a credit card.
Though tracking your money "in your head" is a valid day-to-day approach, getting everything down on paper (or in a spreadsheet) list can work wonders when reviewing your overall financial health.
When you can see your income stacked against your outgoings, you’ll find it easy to spot the holes in your pockets — i.e. areas with unnecessary, outdated or excess expenses you can redirect towards a debt. With plenty of simple tools available online (some for free), this exercise should only take a couple of hours out of one evening.
2. Coordinate your repayment schedule
Schedule your automated payments so the money comes out of your account the day after payday. Time this right, and you’ll always have the funds to cover your bills and debts, saving on late fees and dishonour fees, and minimising extra interest accrued on the account.
Unfortunately, through no fault of your own, it’s far too easy to develop clashes in your repayment schedules — this usually happens if your repayment dates were set up for you by your bank or the business you owe money to, with no regard for when you actually get paid. When changing jobs, this issue may pop up again if your new job pays you on a different day.
But it’s a problem with a simple fix. You’ll get a huge psychological boost from watching your debts go down without, seemingly, having to think about it every month. It reduces the feeling of being overwhelmed by "administrivia", and removes the "yawn factor" from the idea of managing money. This in turn can get you excited about your savings goals, and more engaged with your journey towards financial independence.
3. Motivate yourself with the potential savings
Think of how much you’ll save on interest over time if you paid off your loans or credit cards as soon as possible — literally, sit down and do the maths. Compare the interest paid over the full loan term with the interest paid over, say, half that time. The difference could be a matter of thousands.
Armed with an exact dollar amount, you’ll gain a new perspective on just how valuable being debt-free actually is. It could be just the motivation you need to focus your attention on a specific debt until it disappears. Prioritise the debts you can pay off quicker, followed by the ones that offer greater interest savings for early repayment.
And if you need a little more encouragement, promise yourself a reward once you’ve cleared a debt. By then, you’ll be in a better position to afford it.
4. Set a date and tell your friends and family
Choose a date for when you intend to pay off a particular debt — a repayment calculatorcan be useful here, factoring in the interest amount over time. With a specific date in mind, you’ll have a concrete goal to work towards, making it easier to come up with (and stick to) a realistic payment plan.
But don’t just think about it; talk about it with your friends and family. Not only will this help them understand what you’re facing, and respond supportively (for example, picking a "cheap and cheerful" restaurant for your next outing), but you knowing others are aware of your intentions can help cement your own belief in your actions, thus strengthening your commitment to the cause.
There’s no shame in taking your money seriously. It’s what enables you to take care of yourself and your loved ones day to day. When you open up about your journey with people you trust, you may even find others around you paying off a debt of their own. Together, you can cheer each other on as you each work towards your financial goals.
5. Make a habit of checking in
If you’re working on a big debt, like a mortgage or maxed-out credit card, the road ahead can often seem long and dull. We can only stay motivated for so long before we lose sight of our purpose, so a little reward every now and then can go a long way.
Between now and your debt settlement date, mark on your calendar where you want your balance to be at regular intervals — for example, every month or every season (3 months). These checkpoints serve as smaller, easily attainable sub-goals that trigger a release of dopamine every time you achieve them.
On its own, a "brain hack" like this can keep you motivated step-by-step towards your bigger goals — this is the mechanism behind habit, addiction, and developing new behaviours. But couple it with a tangible prize, like a tasty treat or a night at the movies, and you reinforce the idea that you can still have fun and enjoy life while being financially responsible.