When you’re training for a marathon, you don’t start by going for a 26-mile jog. Why should paying off your debt be any different?
That’s the argument Michelle Singletary makes in a recent column for The Washington Post. While conventional wisdom says to tackle debt with the highest interest rates, Singletary says that in her experience, people have a hard time sticking to the plan.
“It makes good maths sense,” she writes. “But in practice, people don’t do what makes sense — otherwise they wouldn’t be in financial trouble.”
The problem is a lack of motivation: paying off large amounts of debt takes time, and it’s easy to feel as if your small contributions each month aren’t making a significant dent. One solution, Singletary says, is to throw out the conventional wisdom and focus on those amounts you can take care of quickly in order to build up momentum.
“Write your list. From top to bottom, start with the lowest balance,” she says. Then make only the minimum payments on the other debts. “Once you’ve paid off the first debt, take the extra money and now apply it to the next one on your list.”
It might not be the fastest way to pay off debt, but Singletary points to a study by researchers at Northwestern University’s Kellogg School of Management that found that having an achievable goal enhanced the likelihood of participants settling a debt.
If you’re at the bottom of a mountain of debt, take Singletary’s suggestion and start small to build momentum. Once you’ve gotten a few cards paid off, shift your attention to the big ones with high interest rates and chip away dollar by dollar.
Here are a few other simple ways to tackle debt without cashing out your savings: