When I was at Mosaic last month, there were some common themes of questions from listeners who stopped by to say hello.
I’m trying to pay off three credit cards and then I’ll be debt free. I’m paying extra on all three of them.
OK, firstly, stop saying that you’re trying! It gives your brain permission to fail and just shrug your shoulders. Say I AM paying them off – it doesn’t sound like much, but it’s way more powerful when you say it and believe it!
Secondly, that shotgun approach has proven to not work that well. Paying a little extra here and there is the least effective way of getting it done.
The Money Tools book walks you through the step-up plan to pay off a sample $25,000 in debt in around half the time it should take. What you need to do is pay everything extra on the smallest one. In this person’s case, it was a $500 Visa. Make the minimum payments on the other two – every dollar extra on the smallest one. It was going to take until May or so – now it’ll be done by February. Then take the next smallest. Every dollar of the first card is now just re-directed to this 2nd card along with the minimum payments that have been paid all the way along.