I’ve got to ask you- Have you seen the woman on YouTube who teaches you how to give your pet opossum a massage? No? Oh, my word, you’re in for such a treat. Mike and I watched one of her videos over morning coffee and laughed our heads off! I even texted it to my friend who hates rodents and loathes opossums, because that’s what good friends do. Here, when you’re done tackling today’s exercise, take a few minutes, and treat yourself to this delicious morsel of entertainment!
Ok, you might be wondering, what the heck do opossums have to do with getting out of debt?
Opossums are notorious for playing dead in the face of a threat. Their bodies go limp and lifeless while they wait and hope (do opossums feel hope?) for the threat to dissipate so they can go back to their little opossum life. It doesn’t matter if the threat is a face full of snarling, gnashing teeth, or me, shooing it off the front porch with a broom. Opossums just play dead.
I want you to stop playing opossum.
Debt without a purpose and a plan to pay it off is a threat and it requires your attention. Ignoring your debt is like playing opossum. You secretly hoping that the problem isn’t that bad isn’t a strategy that’s serving you.
Debt isn’t a threat that goes away when you ignore it.
It swells.
One of the number one things clients and students share with me is that it feels like their dreams and desires are being crushed by the weight of their debt.
If I handed you an extra $1000 each month, and you couldn’t use it to pay down debt, what would you do with it?
If you’re like the average American, $1000 is close to what you might be paying each month in debt payments. That’s $12,000 a year that could be working for you. Money that could fund your dream goals.
How much money would you be able to use toward your goals if you paid off some or all your debt?
Would you invest in yourself in some way? Could you start that business?
Would you be able to work less? Or take a different job? Work that feels fulfilling?
Getting out of debt gave me the freedom to pursue my dream of working for myself from the comfort of my home (often in pajamas). I finally felt like I had options!
THIS is why I’m so passionate about helping women get out of debt!
When you’re not sacrificing all your time and money to pay off debt you have more options.
And to me, wealth is just that– having options.
So, whaddya say? Are you ready to do this?!
How to Create Your Debt Pay Off Plan
Step 1:
List all your debts (*mortgage optional) in one place. This could be a spreadsheet, a journal or a notebook, or a sheet of paper. Whatever works best for you.
You will include the total balance, interest rate, and the minimum payment amount for each debt.
Step 2:
Calculate the total amount of debt you owe (and take a few breaths if the total is more than you expected. It’s ok, I’ve been there).
Calculate how much you are paying each month on your debts.
Step 3:
Create your plan to kick all that debt to the curb.
There are 2 methods I recommend you use to plan how to pay off your debt. To date, I’ve paid off over $170,000 in debt (some of that includes my mortgage) using the Debt Snowball. The motivational aspect of snowballing the payments is what attracted me to this method. However, from a simple math perspective, the Avalanche method will save you the most money, although it could be a nominal amount depending on your personal situation.
Here are my 2 recommended options in a nutshell:
Option 1: Debt Snowball – This debt-repayment method focuses on paying off your smallest balances first while making minimum payments on all other debts. The idea behind this method is that you will see progress faster which will keep you motivated to keep paying things off.
Option 2: Debt Avalanche – This debt-repayment method focuses on paying off your balances with the highest interest first while making minimum payments on all other debts. The debt avalanche makes the most sense from a numbers perspective since it will save you the most in interest expenses.
I wrote about these methods in more detail here on the blog. Check it out if you want to learn more.
Final Step:
Once your debts are listed in the order you want to pay them off, determine how much you will be paying toward your debt in the next month. You’re going to focus any additional funds toward the debt at the top of your list. You will make minimum payments on ALL other debts.
Check out the examples below:
Debt Snowball Example
| CREDITOR | BALANCE | INTEREST RATE | MIN. PAYMENT | ACTUAL PMT |
| Credit Card | $2,750 | 17.99% | $30 | $480 |
| Credit Card | $6,750 | 22.99% | $70 | $70 |
| Car Loan | $15,500 | 6.25% | $375 | $375 |
| Student Loan | $27,250 | 5.5% | $275 | $275 |
| Total | $ 52,250 | – | $750 | $1200 |
Debt Avalanche Example
| CREDITOR | BALANCE | INTEREST RATE | MIN. PAYMENT | ACTUAL PMT |
| Credit Card | $6,750 | 22.99% | $70 | $520 |
| Credit Card | $2,750 | 17.99% | $30 | $30 |
| Car Loan | $15,500 | 6.25% | $375 | $375 |
| Student Loan | $27,250 | 5.5% | $275 | $275 |
| Total | $ 52,250 | – | $750 | $1200 |
When you pay off a debt you add the amount you were paying to your next debt as you work your way down the list. Your payment will build with each debt, helping you pay them off faster and faster. Like a snowball… or an avalanche.
Debt Snowball Extended Example
| CREDITOR | BALANCE | INTEREST RATE | MIN. PAYMENT | ACTUAL PMT | ACTUAL PMT | ACTUAL PMT | ACTUAL PMT |
| Credit Card | $2,750 | 17.99% | $30 | $480 | – | – | – |
| Credit Card | $6,750 | 22.99% | $70 | $70 | $550 | – | – |
| Car Loan | $15,500 | 6.25% | $375 | $375 | $375 | $925 | – |
| Student Loan | $27,250 | 5.5% | $275 | $275 | $275 | $275 | $1200 |
| Total | $ 52,250 | – | $750 | $1200 | $1200 | $1200 | $1200 |
But here’s the thing… between you and me, it doesn’t matter which method you use. What’s important is that you create a plan that focuses on paying off one debt at a time. That’s the MOST important piece of the puzzle. Focus on one debt at a time.
It’s like that old saying, “When you chase too many rabbits, you catch none.”
Focus on one debt at a time until they’re all paid off.
And just to keep things real, on average it takes about 2 years to get out of debt from everything except your mortgage. So don’t feel discouraged if it looks like it’s going to take a while, it will. I need you to go ahead and do it anyway because the time is going to pass regardless.
Ok, a few last things before you go.
- If you have a debt with a promotional rate that needs to be paid off by a certain time to avoid interest charges, make sure you factor that into your plan.
- You may have a debt with a substantially larger minimum payment amount than the others. Consider if it makes sense to focus your attention on that debt first, regardless of balance or interest rate.
- If you have debt with high-interest rates, as many credit cards do, consider transferring those balances to a lower rate card while you focus on paying them off.
I hesitate to even share this last item because what ends up happening to a lot of people is this– they open up a new low-interest credit card, consolidate their other cards which frees up those credit lines, and then they continue the behaviors that got them into debt in the first place. They end up digging themselves into a deeper hole than when they started. Tread lightly and deliberately if you choose to take the debt consolidation path.
Ok, I’ve kept you reading long enough. You’ve got your plan and you know what to do next. If you still have questions, drop them in the comments!
Onward and upward my friend!
Now, I hope you enjoy these next few minutes learning how to give your opossum a gentle and loving massage.