By Joe Clark
For The Herald Bulletin
Many individuals have set goals and objectives for themselves in the form of New Year’s resolutions. Though some of us have already slipped and forgotten entirely, there are some of us out there who are still relatively focused. Two of the most common resolutions were to lose weight and cut debt. I have experience with both and, believe it or not, they have amazing similarities in terms of behavior patterns and success stories.
When people go on a diet they typically dive right in full speed ahead. Success comes quickly but then begins to wane and eventually something has to give and our old nature begins. When people try to get out of debt they tend to do it with the same attack plan as dieting. Generally they have debt in more than one place — credit cards, a car or two, a house, etc. The burden of looking at your financial affairs is like looking at your body in a full length mirror right after a Thanksgiving feast. You may have enjoyed the meal but the pain is setting in and something has to give.
Similar to a diet when we attack debt we tend to do it with an attitude of the last charge.
“This is it! I am done forever!” You will have more emergencies and more challenges and to ignore that is to fail to understand all great generals lost a battle or two on the way to winning – or losing — the war. We must be diligent, determined and yet dialed into life enough that we can emotionally deal with the things out of our control.
So here’s the battle plan. I have used it personally, taught it to numerous groups including my senior class at Purdue and have seen it flat out works. Make two lists of your debts. On one side list the lowest balance down to the highest. On the second list record the highest interest rate down to the lowest. A big part of dealing with this is simply being aware and facing the facts. We often tend to make above the minimum payment on everything which feels good in the moment but never gets us anywhere near a point of celebration or success.
Find the common debt near the top of the page in each of the two lists. Perhaps you owe $600 on a credit card which is your second lowest balance but it is at 21% and the top of the ‘interest rate’ list. Make the required or minimum payment on everything else and attack that item. Being in debt holds us captive to making other decisions and is hard on the soul and families alike. We need a victory! You can pour all your excess cash into that payment until it is gone like dust in the wind. Success!
You can make see great success by following this pattern and eventually be debt free. It won’t come over night. You will have bills and challenges that pop up but now you have a battle plan. If you are results motivated and follow this method, you will likely can succeed.
Joseph “Big Joe” Clark, whose column is published Sundays, is a certified financial planner. He can be reached at firstname.lastname@example.org or 640-1524.