Break larger goals into more manageable pieces

There are many strategies that you can use to pay down your debt. What matters most is that you keep yourself motivated to make consistent payments on your way to a zero balance.

Start with small goals. Try breaking up your larger goals into smaller, sequential goals. A single large goal can be overwhelming on its own, and if you start to feel like you’re not making progress, you may be less motivated to make payments.

Focus on a single category of debt, or a single credit card or loan. Then, break this debt down further: choose a 10- percent goal or something like it. You’re more likely to meet a goal that’s both significant and achievable to you. Once you accomplish your goal, create another one, and after that, create another. Make it into its own game, and you won’t even notice that you’re doing something you might not have considered before: consistently monitoring your personal finances.

Set your targets where they’ll do the most good. You can have different aims when you’re paying down debt. Maybe you want to get the most out of your money; maybe you want to bring your balance down on a maxed-out card; maybe you want fewer accounts to deal with. It’s your debt, so choose an aim that is satisfying for you, and stick to it.

If you’re having trouble choosing an account to pay down, review your debt spreadsheet, and compare your loans. In particular, look at your interest rates. The higher your interest rates, the more you’re paying per dollar to borrow money. The most strategic move for your wallet is to you pay down your highest interest- rate account first. Paying such accounts down first will ensure that more of what you pay over the long haul will be principal debt, rather than interest that has accrued over time.

Remember that some of your loans come with tax advantages. Interest on your mortgage, your home equity loans, and your student loans are deductible if you meet certain requirements. Your consumer debt doesn’t have that advantage. It’s another thing to consider when you’re choosing debts to pay down.

Make it a rule to spend less than you earn.

Now that you’re paying down debt and setting your goals, it’s very important to keep your spending at a level beneath your income. As soon as you start spending more than that, you accumulate more debt. That will undo the hard work you’ve done up to this point.

It can be tough to keep in control as the months go by. But just remember — you’ve set bigger goals, which are more important to you than your other discretionary expenses. And by the time you get to zero, you’ll have greater confidence in managing your financial affairs.

You’ll have an easier time if you track your spending: write it all down, or use financial software. If you can see what you’re spending, you can also pay attention to your limits, and you can cut yourself off before you enter bad territory.

Reward yourself for progress. Positive reinforcement will help along the way, so try to find low-cost ways to mark off your accomplishments. Go to the beach, go on a hike, or rent your favorite movie. And keep looking forward: you’ll get there in no time.

Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.

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