For those facing an accumulation of unmanageable debt, the success of their strategies has much to do with emotional response. While there are many who function more cerebrally, requiring little more than a disciplined plan that does the task adequately, most people need to feel rewarded. When a sense of accomplishment exists, you are more likely to continue your repayment plan, which is why approaches that offer emotional and rational rewards are so popular. There are four techniques that will help you to include emotion and logic into your debt strategy.
1: Breaking Bad Habits: The first step to debt management is always preventing future debt. In a consumerist world, temptations to spend are everywhere yet are often difficult to spot. That loyalty card that costs $20 a month may seem, at the outset, to offer more than it costs, but in retrospect, this is often not the case. Sales, limited offers, and easy credit are hard to resist, but resist you must. Switching from card to cash is an effective way to train yourself to invite rationality into your financial life. Parting with real banknotes is more difficult than passing over a card.
2:Knowing the Difference Between Good and Bad Debt: According to Panos Mourdoukaoutas of Forbes magazine, the only positive debt is that which gives back in the form of financial returns and has sustainable payments. Assets that appreciate, such as business investments and properties, are positive debts. Those that depreciate, such as vehicles unrelated to business operation, are best paid in cash.
Similarly, education brings massive returns in the form of future income, making it a healthy debt but not necessarily a sustainable one. When fees are high and interest rates are disproportionate, that outstanding amount takes so long to pay off that its interest multiplies it, often by as much as double. While those who have the luxury to take on positive debt are advised to do so in the correct circumstances, those who are suffering under the weight of accumulated, unmanageable debt should return their principle amount to zero with the help of National Debt Relief before considering further investments through credit.
3:Finding Fast Emotional Rewards: There are several repayment strategies that pay off emotionally and rationally. Choosing to pay high interest accounts first gives you a lower principle repayment. A quick elimination of small debts first gives you a sense of achievement that is slightly more expensive in terms of interest, but may be more sustainable for those who lack discipline. Choosing to attack the highest balances first can be effective for those buried under a mountain of debt, since it is the most aggressive and fastest way to eliminate the most intimidating numbers.
4:Staying Honest About Numbers: People often get into unmanageable debt because they are too scared to face the truth about what they owe. While staying in denial might appear to keep you calmer, you will always have anxiety brewing beneath the surface. It takes plenty of courage and only a little time to face up to your total debt, including interest rates, minimum payments and fees.
Once that’s done, you can begin to find a solution that brings true solace.