Five keys to eliminating your debt

Thursday, Feb. 15, 2018 4:20 PM

Today’s column is about getting started on a successful path to paying off your debt.

If you’re like me, making more money isn’t the only answer. After all, over the years, our income went up and so did our debt. Reducing spending helps, but it can be hard to maintain the willpower. We’d start and then revert to old habits in a few months.

Here’s what we did, and I’ve seen it work for others, too:

Get organizedOur finances were out of control. Symptomatic of our state of mind, our bills and credit card statements were scattered in different spots around the house.

The first step toward paying off our debt was getting organized. Start with three file folders:

To Be Paid: As bills and credit card statements arrive in the mail, open them and place them in this folder.Paid Bills: When you pay a bill, move the statement to this folder. There is no need to have a folder for each type of bill you receive. Just put them all in one.Paid Debts: Keep your debt statements separate from your monthly bills by placing them in a separate folder. This will make them easier for you to find.Write it downThe truth is I didn’t know how much debt we were in until I added it all up. As bad as it was, the fear of not knowing was worse.

With your statements organized, make a list of your debts from smallest to largest balance. Don’t include your mortgage. Focus on credit cards, consumer debt and other loans. For each, note the current balance and minimum payment due. You’ve now created your debt-payoff worksheet.

Start smallFocus all of your effort on paying off the smallest debt on your list. Don’t be tempted to pay a little extra on all of your debts. Pay off the smallest one ASAP. Use ideas from earlier columns in this series to generate extra money and reduce spending (

Celebrate winsA client reminded me about celebrating. I’m often so focused on fixing problems and setting goals that I forget to acknowledge small successes.

Each time you pay off a debt, cross it off of your debt-payoff worksheet and do something small to celebrate. It could be a pizza and movie night or going out for ice cream. Any small reward will work.

Look for opportunitiesAs you eliminate a small debt or two, you’ll likely feel a surge of motivation. With that newfound money motivation, start looking for opportunities to reduce your debt. Get creative.

Success begets success. Take those small wins and build on them.

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