Before going into battle you must know your opponent. You absolutely need to know your enemy’s movements and how he operates. Debt is our enemy and it is time to get to know all the details, all of its weaknesses so that we can attack!
How much do you currently owe in debt? If you’re not sure, what’s your best guess? On a blank piece of paper, write your answer and we will revisit it later.
Take these action steps to prepare for the fight of your life:
1. Get organized.
First of all, gather all of your financial paperwork (e.g. pay stubs, copies of tax returns, credit card statements, bank statements). I recommend keeping everything in one location for easy accessibility. No more stacks of credit card bills hiding in dark corners!
2. Create a list of every single debt from smallest to largest.
Keep it simple or get as fancy as you want. A sheet of paper or an Excel spreadsheet.. whatever floats your boat! Include the name of each creditor, the principal balance, and the interest rate. You have just created your debt snowball worksheet! You can either opt to print a template from the internet (google debt snowball worksheet). There are tons of free ones available. Add up the total and take a moment to look at it (no REALLY look at it).
Next, compare this number to the number that you wrote down earlier. How accurate was your guesstimate? Please don’t panic. And don’t beat yourself up! Instead of living in regret, choose to use your energy to focus on slaying debt one step at a time.
3. Make minimum payments on all debts except the one w/ the lowest balance.
Now throw every available dollar at the smallest debt first. After the smallest debt is paid off, proceed to the debt with the next smallest balance and repeat.
4. Stay uncomfortable with your debt.
Don’t become BFF’s with it. Rather, treat debt like the enemy it is. Re-visit your debt balance often so that you can keep the finish line, (debt freedom), at the forefront of your mind. Consider writing the balance on a post-it and sticking it on the refrigerator or on your bathroom mirror. Or write it on the whiteboard in your kitchen. You will be re-energized and motivated to keep going as you walk past this reminder each day.
5. Do a monthly debt assessment.
Lastly, as you make payments on debt, re-write your balances to track your progress each month. Keep a running tally. Slowly, but surely, you will see the debt total decreasing month by month. Then, whenever you feel like giving up, look back at the starting point and celebrate how far you have come!
“Know your opponent and you will never lose, know yourself and you will always win”. – Sun Tzu’s The Art of War
Is your debt really your enemy or are you bestie? How much of your monthly income is currently being used toward debt payments? Reflect on what you could do with that money if you were debt-free.