I thought I’d share a bit of what I’m going through as I try to rapidly pay down my debt. I guess it would of been about a month and a half ago that I decided to start taking action on my debt and get it paid down. I’ve noticed some very odd mental things coming out that I’d never expect or that I was critical when it happened to other people.
There are two theories of thought on how to pay down debt:
- Put all extra money on the highest interest, make minimums payments of others.
- Put all extra money on the smallest debt, make minimum payments of others.
I’m a very logical person and the math says it all; pay the highest interest off first. The reason is that you have to pay back less money. Depending on how much debt you have, you can finish a few months early because you avoid a lot of the extra interest.
I realized something, the vanity of paying off your debt disappears probably a week after you make your first over and above payment. The problem is that you don’t receive any short term gratification until the debt is paid off. I’ve been training myself to ignore the need for gratification in the short term, so I can continue working for the more long term gratification, but that really is a losing battle.
There has to be a reward in the short term of paying down debt. This is why I think going after the smallest debt is the best. Before I would of said tackle the highest interest. Finishing off a debt is just a great feeling because than you have extra money sitting around each month. You can take that money and put it against your next debt. It’s almost like a snow ball effect to debt payments.
Lucky for me, my lowest debt is also my highest interest. I’m hoping by the end of August to have no credit card debt. Yippie. Than it is onto a more long term student loan repayment plan. I will be paying it down as fast as I can, but there is just so much of it to pay back.
Tags: Debt