In a previous article, I stated that to gain a sense of control over spending and especially over credit card debt, people must know how much they owe on each of their cards. And they should put this in writing. It’s important to grab a pen and paper or create a spreadsheet and list these balances. Specifically, the balances should appear from smallest to largest. Why make this list? And why from smallest to largest? The short answer is Order and Optimism. The “long” answer (well, not so long) follows.
Order: At times, when people carry credit card debt, they practice what I call “The Ostrich Method.” You may have seen an ostrich stick its head in the sand. Makes it difficult to see, right? We humans sometimes do the same thing (figuratively) when we don’t want to face the truth about something…like credit card debt. “If I ignore it, it will go away, yes?” No! “The Ostrich Method” simply leads to other bad habits, including increased ignorance and a lack of organization.
By opening all of your latest statements and listing the current balances, you establish a sense of order. You take the guesswork out of the picture and replace it with knowledge. This empowers you! You see exactly what you are facing (what you owe; the minimum payment due; the interest rate; etc). This is good! Instead of an estimated balance, you now have an exact balance. And you’ve condensed this information from several separate statements to one list. You’ve gone from scattered to succinct; a little shift makes a BIG difference.
Optimism: Now, I draw your attention to the fact that you’ve listed the balances from smallest to largest. “Why is that important?” you might ask. Well, let me start by referring to a line in my book, Master The Card: Say Goodbye to Credit Card Debt…Forever!: “Money is as much psychological as it is material.” It’s natural to get overwhelmed by credit card debt. The amount does not matter. $1,000….$100,000…more…less. If you are worried about how you will pay off the debt, then you are overwhelmed. It weighs on you: thus, the psychological part of the quote. So by listing your balances from smallest to largest, you can train your eye (and ultimately your mind) on the card with the lowest balance.
For example, say you have balances on four credit cards and you list them as follows:
Card A: $600.00
Card B: $1,050.00
Card C: $1,500.00
Card D: $2,700.00
Instead of adding up the grand total on the four cards or even looking at any combination of the cards, which can be scary, focus your attention on Card A. Which seems more manageable: Card A or the other cards? Card A, of course. And it’s very likely that you’ll say to yourself, “$600? I can pay that off pretty quickly.” Great! Now do it. Focus your attention and as much money as you can on paying off that card ASAP, while paying the minimum on the other cards. By doing this, Card A is paid off in short order AND you gain a sense of victory, an important psychological component when getting out of debt. You’re now optimistic and know that in due time, you’ll pay off the other cards in the same fashion.
Order and optimism are essential when freeing ourselves from credit card debt. They were at the heart of my liberation process. Order and optimism give us a plan and hope. With this knowhow and confidence, we can overcome any obstacle.
MUST READ: Joe Paretta’s article, Do You Know What You Owe?
Joe Paretta is an author, speaker, and coach. His first book, Master The Card: Say Goodbye to Credit Card Debt…Forever! (Balboa Press, 2010), is one which he considers “a labor of love.” After accumulating $12,000 in credit card debt, Joe changed the way he thought about and used money and credit cards. As a result, he has been free from credit card debt for many years and coaches others to freedom, too. To learn more about Joe or to purchase his book, visit his website www.joeparetta.com.