Debt Reduction Methods – Motivation

Thanks for coming back again today.  Yesterday I started an article (Debt Reduction Methods – The Avalanche Method) and found that it was getting longer than I intended so I’m going to take this opportunity to “flesh out” the things I missed yesterday.  By way of a brief review, the simple thumbnail of the Debt Avalanche method is that you list all your debt by order of the most expensive first.  In other words, you look at all of your debt by way of the interest rate that you are paying and list the higher interest rates first and then the next, and the next, until you have the lowest interest rates listed at the bottom.  This particular approach is strictly based on math and not nearly as emotional as the snowball method.  That’s why the critics say that it’s not as likely to achieve fruition (in other words, be followed through to its completion). 

While math isn’t nearly as likely to emotionally engage us as other possibilities (like knocking down one complete credit card payment in a very few months, and them moving on to the next), I still believe that emotions (how you feel about money and how much your debt actually costs you) play an important role in financial decisions.  Even though it feels really good to take a credit card payment that may have a balance of only $200, or so, and paying that off in the next two to three months, the actual savings may be insignificant compared to paying that same amount of money on a card that has a substantially higher interest rate. 

There truly is an emotional aspect to debt reduction.  And even though there is an emotional satisfaction to paying off your smaller debt faster and a motivational boost associated with doing so, the Avalanche method will save you money and years toward your goal of being out of debt.  But the simple truth is that one of the biggest reason people fall into debt in the first place is because of an inability to separate emotional thinking from rational thinking.  If I were to move into the bold and blatant arena here I’d have to boil that down to an unwillingness to buy into the need for self discipline (oops, maybe that’s a bit bold). 

It is true that the Snowball method of debt reduction gives you the satisfaction of knocking out some of the smaller debt, and the related payment, quickly.  It’s also true that the Avalanche method can also provide you with early successes because you’ll end up paying your total debt off much faster because you’re paying off the most costly debt first.  It may be time to make a change to the way we view debt and reevaluate how we are emotionally entices.

Let me leave you with a few suggestions and thoughts:

  • Following the debt avalanche method will allow you to feel good, knowing that you’ve made a sound decision and will spend less money than others do who use another approach.
  • If you choose the Avalanche Method of debt reduction you can motivate yourself by creating milestones that can be measured… (i.e., paying off $1000 of high-interest debt). sends you a monthly update detailing how much you are saving and when you will reach your goal. 
  • While emotions cannot be eliminated, learning to focus on the best math for debt reduction can improve your overall relationship with money.

There’s more to come, so please come back next week for the more options. actually uses a hybrid approach to debt reduction and we’ll look further into that in my next article.  Please leave your comments and thoughts below.

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