Are you discouraged by your finances?
One of the top 10 new years resolutions each year is something related to finances: getting out of debt, saving more money, starting a budget, investing more, etc. Many of you reading this article set one or more of these as your new years resolution(s), I did. While I don’t like resolutions, I do set goals. Ours was to continue our progress to get out of debt.
Setting the goal is the easy part, making it happen is the real measure of your commitment. Let’s face it, life throws us curve balls and we have to jump a few hurdles and maybe climb a few hills to reach the goal. Life is seldom a straight, clear and easy path.
Arriving in the mailbox of many people over the next few weeks is the first curve ball, credit card bills. Millions of people around the world used their credit cards to purchase, on average, $800.00 in Christmas gifts. An even more scary statistic is that more than 4.4 million people still owe balances on their purchases for Christmas 2006! If you are one of the many people receiving a credit card bill that you can’t pay off right away, it’s easy to get discouraged. Many people walk around in a constant state of financial hopelessness. Feeling that being in debt and living paycheck to paycheck is the norm.
So let’s assume you survived the shock of the credit card bill, you jumped that hurdle and remain focused on the goal. Then your car dies and requires a new motor (this happened to Paidtwice recently). You get through that and the heater goes out on your home, then your child needs braces, etc, etc. If you are anything like me, it seems I no sooner get past one hurdle, and another is rearing it’s ugly head.
I’m sure you can see how easy it is for people to just give up on their resolutions, feeling as if they are never going to reach their goals. Here is the bottom line and the ugly part of debt: It’s incredibly quick and easy to go into debt AND it’s incredibly long and hard to get out. It takes all of 10 minutes to buy that new car or that new LCD HDTV, but it can take you months and even years to pay it off.
Fortunately there are some things you can do keep you motivated, track your progress, and keep you from being discouraged:
Create a Debt Snowball and update it frequently
A debt snowball is a simple tool that helps you to organize your debts and pay them off. It uses the metaphor of a snowball due to concept of rolling payment amounts forward as each debt is paid off. You may start by paying $200.00/month on the first credit card and minimum payments on the rest, then once the first one is paid off, you add the $200 to the minimum of the next payment. You repeat this process, “snowballing” the payment you make on each debt. You can read more about creating and managing a debt snowball in my article How To Get Your Finances Under Control – Step 6 Get Out of Debt.
The wonderful thing about a debt snowball is it’s a visible way of seeing your progress. As I payoff our debts I cross them off. I can look at my debt snowball right now and out of a list of 8 or so items, 4 have been paid off. So I’m 50% of the way there.
Each time I get discouraged and feel like I’m not making any traction, I can look at that debt snowball spreadsheet and SEE that I really am making progress.
Track your net worth
Tracking your net worth is another tool you can use to track your progress. I don’t particular care how much I am worth in comparison to others, nor do I really care what my total net worth is, I just like to see the % going up. Last year, primarily through paying off debts, my wife and I increased our net worth by more than 170%. I calculate my net worth monthly and use Microsoft Excel to chart it. Not sure how to calculate your net worth? My article How To Determine And Track Your Net Worth will show you how.
When I get discouraged, I can pull up my net worth chart and visibly see my net worth growing. Sure, every so often it dips, but the overall trend is in an upward direction. It’s a great way to look back and see the overall progress you’ve made.
I firmly believe it’s important to celebrate your achievements. We’ve been working hard to payoff our Chase card, and if everything goes as planned, I’ll send the final payment here in the next week or so. When I do, we’re celebrating. I am not sure what we’re going to do, but all 8 of us will being going out to dinner, or to Nascar speedpark, or something. Celebrating your accomplishments helps to keep you focused on the goal, and gives you smaller short term goals to work towards. Celebrating helps keep you from getting discouraged. Don’t forget to celebrate your wins, even the small ones.
Have an accountability Partner
I think I first heard this term at our church with regard to living a more Christ like life, but the term applies in your personal finance life as well. My primary accountability partner is my wife. We have agreements with each other to not spend over certain amounts nor to spend outside of our budget without consulting each other first. We do our finances together, make commitments to each other and hold each accountable. This is a STRONG tool that helps to keep you focused and frankly to keep you from making the same stupid mistakes that got you into your bad financial situation in the first place.
Not married? Use your boyfriend or girlfriend. Don’t have one? Use a friend or close family member you trust. Many of us personal finance bloggers use our blogs to hold ourselves accountable. For example, my wife and I considered buying a new Chevy Suburban 2 months ago. One of the first thoughts in my mind was, “What would my readers think? I mean you tell them never to buy new cars. You’re in debt and telling them to aggressively get out and you’re considering buying a new $40,000 vehicle!“. We didn’t buy one of course, but I consider you one of my accountability partners…thanks for talking me out of it!
It’s so easy to become discouraged and give up. Don’t give up when that first hurdle comes your way, or the second or the third. Just keep focused on the goal. Sure, those hurdles may slow you down, but you are still heading toward the finish line and you WILL get there. Maybe not as quickly or as easily as you would like, but you will. I would encourage you to use these simple tools to stay on track. They work for me, and I’m sure they’ll work for you too.
What tools do you use to stay encouraged? Do you get discouraged with your finances? How do you keep yourself focused? Add a comment!