Is there a monster in your mailbox?

Friday, Jan. 5, 2018 6:09 PM

Are you scared to open your credit card bill, or should I say bills? The typical credit card user has four credit cards in his wallet.

If you are scared, you’re not alone. Having had more than 10 credit cards at one time and having been petrified at the sight of the bills, I know how it feels. Each trip to get the mail left me filled with worry and fear. It was like there was a monster living in my mailbox.

The worry and fear caused me to stop dreaming. That’s the real problem with debt and unconscious spending – it steals dreams.

Ready for some good news? You can eliminate worry and fear this month and be debt-free by this time next year!

Eliminate fearI’ve learned that fear comes from the belief that something terrible is going to happen. In this case, the bad we’re talking about is not being able to pay our bills, defaulting on loans and bankruptcy. If you’re like me, you may be imagining a situation that is much worse than reality.

It’s time to confront reality by adding up your debt. Gather all of your credit card, car loan, home equity line of credit and other loan statements, except for your mortgage. List the balances and minimum payments on a sheet of paper, or in a spreadsheet, from smallest to largest.

After working with lots of clients, I have learned that your total debt is likely to equal 25 percent of one to two years of your household income. See for yourself. Add up your debt and divide it by your income.

Attack those debtsCongratulations! You confronted the monster in the mailbox and lived to tell about it.

Now that you have a list of debts, you can start taking action. Pay the minimum payment on all of your debts except for the smallest one on your list. Attack that smallest debt like your dreams depend on it because they do.

Slay the monsterReduce your spending and use it to pay off your debt. You’ll need to be aggressive, but it will be worth it.

Remember, as you cut expenses out of your budget, they don’t have to be gone forever, but they do have to be gone for now so that you can become debt-free.

Paying off your debt can be hard, but along the way, you will take back control of your life and your dreams. You’ll find that once you are committed, you will begin to notice all kinds of opportunities to chip away at the debt that is on top of your list.

In my next column, we’ll explore how to accelerate paying off your debt.

Durango resident and personal finance coach Matt Kelly owns Momentum: Personal Finance.