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5 Steps to Get Out of Debt - Small Payments Make It Easier to Pay Off Debt

by Julie Jaggernath

Think of a big project that you’ve been meaning to get done. Maybe it’s a home renovation, sorting the garage, or an assignment at work or school. However, some projects seem so daunting that it’s easier to put them off as long as possible.

Many people find it hard to pay off debt because they deal with their debts like this too. They put off opening the mail, answering the phone or making a plan so long that they don’t know where to start once they do sit down and take stock of where they’re at. As tempting as it might be to hope that the garage sorts itself, one of the best strategies for tackling a big project is to break it down into smaller achievable steps. This is also true when you want to get out of debt

       Use the LEGO strategy to pay down debt.   

To further your progress with the 5 steps outlined in this blog post, consider using the LEGO strategy when you’re tackling your debts too:

Limit yourself, don’t bite off more than you can do
Encourage yourself to stay on track
Get started, time is money
One step at a time


1. Small Payments Add Up to Pay Off Credit Card Debts

One of the best ways to deal with debt is to break large balances down into manageable payments based on a realistic budget. Charging $5,000 on a credit card takes mere moments. But to pay $5,000 off is no small task. However, setting a goal to pay off $150 a month is a much more realistic starting point. Some people might break it down even further so that it is a weekly goal. They look for ways each week to save about $35 so that they can meet their goal. Small changes really add up over time and pay off a big credit card bill. 

In case you’re curious, the $5,000 that took no time to rack up, at 18.9% APR, will take more than 25 years to pay off if you only make minimum payments. But you can get rid of the debt in 2 years with as little as $65 a week or about $9 a day. Use a financial calculator to see how you can pay your debts off faster.

2. Accelerate Your Payments to Pay Off Debt Faster

Making smaller payments more often is a strategy that pays off big time when paying off a mortgage. If you only make monthly payments, you end up paying more interest over the life of your mortgage and you miss taking advantage of time. Time will pass regardless of how you make your mortgage payments, so one of the easiest and most painless strategies to paying your mortgage off faster is to accelerate your payments. Switch your monthly payments to semi-monthly, bi-weekly or even weekly payments, based on how often you get your pay cheque. This simple change will save you time and money. To learn more about how to pay off your mortgage or loan faster, click here.

Strategies to get out of debt and pay off debt require time.

Making more frequent payments is also a great strategy to pay off credit card debt faster. The more often you pay even $20 extra towards your debt, the less likely you are to blow that $20 on something you don’t need or want. If you want to get out of debt, find ways to make payments as often as possible. 

3. Keep your Money Safe from Yourself and Avoid Impulse Spending

If finding that little bit extra is what’s holding you back, try tracking your expenses for a few weeks to see where you’re actually spending your money. What you find out about your spending habits might surprise you! Most people don’t realize how quickly all those little expenses and impulse buying add up – buying a daily coffee, grabbing a newspaper, picking up take out instead of making dinner.

Then there are those less noticeable habits because they get lumped into a bigger bill – downloading ringtones and apps, subscribing to TV channels that no one has time to watch, buying gifts or toys at the grocery store because it is convenient. You can now get almost anything you want at virtually any time of day at your local supercentre grocery, so a great place to start saving money is to look for ways to save on groceries

4. Track Your Expenses

Make tracking your expenses fun for the whole family by setting up a challenge. See who can be the most accurate, stick with it the longest, or find the most unusual expense they didn’t know they had. Use a free app to make it fun or get your kids to design a special cover for your tracking notebook. Talk about your successes at dinner and find ways to help each other stick to it for at least a month.

Tracking is the difference between a budget that works and one that doesn’t. If you’re not sure where to start, get a free tracking notebook or Excel spreadsheet.

5. Create a Spending Plan

If the word budget scares you, think of it as a plan – a plan that you create based on choices you make and priorities that you identify. You get to choose if you’re going to spend an extra $10 each day buying lunch at work, or if you’re going to put that $50 a week towards your goal of going on a special vacation. Setting a goal to save $10 a day sounds so much easier than saving $200 a month or $2,400 a year!

Small Changes Add Up So Make Them Work for You

Before you decide that spending $10 a day less isn’t enough, remember how slow and steady won the race for the tortoise. When asked how their credit card balance got so high, people generally say that it’s just some of this and that. It’s the small purchases that have added up and gotten away on them.

You might have noticed the same thing, how those small expenses add up to a lot of debt. Or maybe you’re someone who shops at the dollar store and is all too familiar with the “dollar” store phenomenon. How could that one bag really add up to $30? It’s just a “dollar” store!

Look for ways to put small changes to work for you the other way around. Saving just a little at a time really does add up. Ask anyone who has a coin jar filled with pennies stashed in their closet. When they empty it and start rolling the coins, most of them don’t realize how much they’ve got . . . and more importantly, how they didn’t miss the change they put in the jar in the first place.

Focus on What You Can Control, Make Wise Choices with Your Money & Pay Off Debt

If you need further proof that all the small changes you make add up, consider what it takes to grow a crop of fruit or vegetables. The gardener doesn’t put the seeds in the ground one day and go out the next day to harvest the crop. It takes time for the plants to grow. The gardener must tend to the soil, add fertilizer, guide or prune the plants as they grow, and water them. The gardener must also depend on factors beyond their control, like sunshine and rain. Some seasons are better than others, but in the end, the small, careful actions of a diligent gardener pay off with a good crop at harvest time.

Budgeting is much like growing a garden. It takes time for small change to add up. It takes time to pay off debt. And at times, we face circumstances beyond our control. But in the end, we reap what we have sown.

Make Every Little Bit Count

Every little bit counts so trying several strategies and using the ones that work best for you will get you results worth bragging about!

If you have a tip about how you make every little bit count, share it below and help someone else!

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