Is Goal Setting a Key to Debt Reduction?

Is goal setting a valid strategy to reduce debt?  Personal financial debt can seem overwhelming at times.  It can cause much frustration and stress in our lives.  In fact, financial problems are one of the leading causes of divorce in this country.  Debt can also contribute to poor health.

There is a way out of debt.  It involves three steps.  First, you must acknowledge that you have too much debt.  Next, you must commit to taking the necessary actions to reduce your debt.  Finally, you must use goal setting to establish a step-by-step plan to get out of debt.

The first step in goal setting for debt reduction is to analyze how much debt you have.  Most people are not aware of the total debt they face.  This adds your stress because ignoring a problem does not make it go away.  Most experts advise creating a chart or spreadsheet that lists all of your creditors and the amount you owe.  Also list the interest rate of each debt. Then prioritize which creditors you need to pay off first.

The next step in debt reduction goal setting is to determine the minimum payment each creditor will accept.  List that on the chart or spreading sheet.  Keep in mind that if you only make the minimum payment each month, your finance charges will each up most, if not all, of your payment on the principal.  There are a number of free debt reduction calculators available on the internet.  This will help you determine how much extra you need to pay.  It will also help you with your goal setting efforts.

At this point, many people feel completely overwhelmed by the amount of debt they may be facing.  If you find yourself in this spot, you may want to consider a credit counseling or debt consolidation service.  There are a number of good ones available.  Check with you local Better Business Bureau and online to decide which is right for you.

In your goal setting and analysis, you may decide that you can’t afford to make any increase in your current debt reduction payments. This is not necessarily true.  Review your current household budget and look for areas where small adjustments can be made.  Remember, it only takes a few dollars added to your monthly debt payments to make a difference.

Other goal setting suggestions for debt reduction are to reduce your expenses.  Examine your utility expenses.  This is an area we have some control over.  Also take a look at reducing your grocery spending.  Buy only those items you truly need by avoiding impulse items.  Shopping at wholesale warehouse club stores will usually save you money.  Cut up your credit cards.  Drastic but it works.  Carry only one major credit card and use it only for emergencies.

Goal setting will help you stay motivated to reduce your debt.  Post your chart or spreadsheet so that it is visible.  Break your goals into small chunks.  This will create some easy wins.  Post those wins on your chart.  It is also important that you give yourself rewards for reaching those goals.  This will help you stay motivated.  Goal setting to reduce your debt can be fun if it is approached with the right spirit.  Last, statistics show that most people who use goal setting to reduce their debt are debt free in three to four years.  In the scheme of things, that is a very short time.

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One thought on “Is Goal Setting a Key to Debt Reduction?”

  1. Hi David… that was a great article with lots of good tips for people.
    Another thing that can really help… is if the person in debt goes through these things with someone else — sometimes when you are in the middle of a problem, e.g. financial debt, you really can’t objectively look at your situation and see where changes can be made easily. Financial debt often is usually a symptom of other problems in the person’s life.
    There’s so much information and support out there for people — that is easily accessible and free.
    Best wishes

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