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Three Money Strategies

I Always Use for Debt Reduction

By Christopher E. Powell

As a mathematician, speaker, and entrepreneur with cerebral palsy, I clearly understand the day-to-day struggles of life. Challenges for me, such as walking, brushing my teeth, or just getting a drink of water, can be pretty daunting. Beyond my own physical personal challenges, I face other realities in terms of being an adult. Issues such as work, maintaining good health, and overall day-to-day stresses can also be exhausting.

One of the most significant issues and obstacles for most of us is personal finances, especially when handling our debts. Personal debt can be one of the most complicated aspects of everyday life. If not carefully controlled and managed, it can have devastating consequences and effects on our lives. Utilizing a system of techniques or strategies that assists in our financial journey could set us on a path towards independence, happiness, and success. There are three strategies I always use for debt reduction.

1. Brainstorm a Few Ideas and Create a Workable Plan

The first strategy I implement is brainstorming and forward or situational thinking. Wanting to reduce your debt is honorable, but you must be sure that certain bases are covered beforehand. Situational thinking provides immediate insight into potential outcomes that may come about due to your decision. My experiences have taught me to always think about the implications of a financial decision before taking action.

Go through at least two or three mental scenarios that could happen and their impact on your finances if you make them. The more time you take, the better.

Have patience until you come up with a sound decision. Ask yourself questions such as, “Will I have enough in my account to cover any extra expenses that may unexpectedly arise?” Are you willing to make sacrifices? Ask, “Am I willing to forgo pizza on Tuesday nights to make an important payment?” Life can throw us curveballs, and we have to be prepared for uncertainty, although we can’t prepare for everything. Also, our temptations can influence our emotions and decisions from time to time. It would help if you scrutinized all of these situations.

Another thought is always to make sure that if you have additional checking or savings accounts, they are well equipped to back you up if you need extra cash. Once you believe you have made the appropriate decision based on your possible scenarios, you can proceed with your plan.

2. Start Small and Achieve Big Gains Over Time

The second strategy I use is the “small chunks/big chunks” cash technique. Small chunks of money are amounts such as $10, $20, or $25. Big chunks could be $50 or more. You may not think such small amounts of money can make a big difference in reducing your overall debt. Not true! Applying consecutive small amounts of money over time can result in significant gains.

For example, if you were to pay your lender $25 a day for four consecutive days, a $100 deduction would result. Your accumulations of four successive days of paying $25 just gave you a $100 reduction by the end of the week on your debt. Applying bigger chunks of money may be more appropriate when you receive your paycheck or a financial gift, and you can allocate a more considerable amount to your lender.

One of the most important things I have realized is the more payments you can make, the better. Paying your credit card or student loan once a month on time is excellent. Making additional payments is even better! Sending in more than one payment is beneficial because it benefits you from a perspective of interest and time. The more payments you can send, the less interest you will pay, and the faster you will pay off your loan or debt. Always check with your lender to see if extra payments are allowed without a penalty. If it’s allowable, you will be well on your way to starting your debt reduction process. It can be great motivation, no matter the size of the additional payments you make.

3. Bundle Monthly Bills for Clarity

The last strategy involves paying your other monthly bills at the same time and on the same day. Most of us have recurring bills such as internet, gas, electricity, and cell phone. Get into the habit of paying them all early and on the same day. Of course, please make sure that you have the funds available. Bundling your monthly bills and paying them early in one fell swoop will give you a clearer vision for the rest of the month. Knowing that these expenses are paid ahead of time can allow you to refocus on your debt and possibly create additional revenues that you can send to your debtor. Using this method eliminates the stress and worry for those bills and can allow you to continue and concentrate on your main objective.

Remember your debt reduction journey should not occur only once a month when payments are due. Every day, you should be thinking, strategizing, and even developing ideas to help you move forward towards your quest for financial freedom. The hardest part is getting started. Once you see the benefits of your labor, it will motivate and inspire you to continue. No matter how small or large your payments may be, you will begin to see a faster reduction of your debts. The key is sustained consistency over time.

I encourage you to get started on your journey towards financial independence. There is nothing like seeing the fruits of your labor. Try the above strategies and also think about creating some of your own.