Welcome back to our Monthly Money Makeover! This March, we’re getting into the “Zero by ’30” challenge, where we’ll zero in on our smallest debt and do our best to pay it off by the end of the month. On the surface, this might seem like a small step, but trust me, it’s a giant leap towards eliminating debt, dollar by dollar. This is more than just reducing numbers on a statement; its about taking actionable steps to get rid of debt and having the opportunity to see the impact small debts have on our finances.
Why This Challenge Matters
Paying off the smallest debt might seem like a small victory, but it’s the snowball effect that counts. By focusing on a single, small, achievable goal, you’re not just reducing your debt; you’re building financial habits. This challenge teaches us to:
Understand our debts better by examining amounts, interest rates, due dates, and fees.
Learn how to communicate with creditors, which can lead to better payment terms or advice.
Develop a habit of regular payments, showing us how consistency can lead to major progress over time.
It’s not just about clearing a balance; it’s about laying the framework for healthier financial habits. Here’s how we’ll do it:
- Identify Your Smallest Debt
First things first, let’s figure out where we’re starting. Get all your financial statements (bank statements, credit card statements, bills, etc.) and make a list of everything you owe, from the largest balance to the smallest. This could include credit cards, loans, and even those overdue utility bills. The goal here is to find the smallest amount you owe. Why focus on the smallest amount? It’s about setting achievable goals. Paying off a smaller debt quickly can provide a psychological ‘pick-me-up’ and set the stage for tackling bigger debts with confidence.
- Review Your Budget
Now, take a good look at your budget. Where is your money going each month? Start by distinguishing between your wants and your needs. Needs are your non-negotiables: rent, utilities, groceries. Wants, on the other end, are areas where you might be able to cut back. Think about subscription services you don’t use often, daily convenience store runs, takeout, etc. Reducing these expenses, even temporarily, can free up more money to put towards your debt. It’s all about prioritizing your financial future over immediate pleasures.
- Set a Precise Target
Understanding the exact amount you need to pay off is important. This means considering not just the principal amount but also any accumulated interest or late fees. Contact your creditor if necessary to get the full picture. Setting a precise target gives you a clear goal for the month. It transforms a vague ambition of “paying off debt” into a concrete objective of “paying off $X.”
- Create a Payment Plan
Here’s where strategy comes into play: Divide your total debt by the number of days in March (31) to calculate a daily payment amount. If you prefer a weekly approach, divide the total by 4 for your weekly payment target. This step is about breaking down your goal into manageable amounts. Paying a small amount daily or a larger sum weekly helps integrate debt repayment into your routine, making it less daunting and more manageable as you get to the end of the 30 days.
- Find Extra Money
This month, challenge yourself to boost your income. Remember, this doesn’t always mean more work; this could be selling items you no longer need or finding creative ways to save on existing expenses. Every extra dollar you find is another dollar towards your debt. Remember, this boost doesn’t have to be a long-term commitment. It’s a temporary push to achieve your “Zero by ’30” goal.
- Prioritize Your Payments
Make your debt repayment a priority. This means that before you spend money on any non-essential items, make sure that your daily or weekly debt payment has been made. This is usually the hardest part because sometimes prioritizing debt seems like we are taking money away from our current needs to pay for something from the past. But it’s a practice in financial discipline, teaching you to prioritize long-term gains over short-term gratification. This step isn’t just about paying off debt; it’s about reshaping your financial habits and decisions.
- Track and Celebrate
Keep a close eye on your progress! Use a spreadsheet or an app to track each payment you make. You can find several free tracker templates online. Celebrate your milestones, no matter how small. Maybe it’s every $40 paid off or each week you successfully make a payment. These celebrations are needed because they reinforce your positive behavior and keep you motivated towards your goal.
In this “Zero by ’30” challenge, we’re doing more than just paying off a piece of debt. We’re developing the skills and habits that form the foundation of a healthy financial relationship with getting rid of debt: Understanding our debts, making informed budgeting decisions, prioritizing our financial goals, and finding creative ways to achieve them. This comes down to taking control of our finances, one small step at a time—or one small amount at a time.
