Debt Reduction Goals for 2011

The start of another year means new challenges and goals for everyone.  As positive as everyone wishes to be if you know you have a mountain of debt hanging around your neck it can be a real downer.  Debt isn’t bad in itself but what needs to be done is break down debts into manageable chunks.  This is exactly what’s needed at the start of 2011.

The thing to do is First decide on which of your debts you want to get rid of (have a look at my post on this) and Second, decide how much you want to pay off by 31^st December 2011.  Then Third, put together your plan for how you are going to go about it. 

Your plan needs to be split down into 12 monthly steps identifying how much you aim to pay back each month.  A combination of reducing outgoings and increasing income will provide you more than you think and faster than you think.

Set SMART Goals

For your goals to be meaningful they need to be challenging so that when you go for it and meet each monthly goal you’ll feel really good about yourself.  To do this make sure your goals (your annual and monthly figures) are S.M.A.R.T.

Specific : your goals will be to save a set amount by doing x, y and z and increase your income by doing a, b and c.

Measureable : your financial goals are only measurable if you put numbers against them – don’t say ‘reduce amount spent on buying coffees’, put numbers against each goal.

Achieveable : make sure your goals are achievable and attainable, not easy ones - give yourself some challenge.

Realistic : ensure your goals are realistic given the time and resources you have and your own personal circumstances.

Timebound : put a date on each goal.  Pretty simple for these goals as you just need to check progress at the end of each month.

Record Your Goals and Measure Progress

All you need to do is write your goals down in a notebook and keep everything updated throughout the year.  By all means create a simple spreadsheet to track progress if that helps. 

As you go through the year it’s OK to update your monthly goals, just make sure you keep them challenging.  Keep thinking about what works best for you in terms of reducing your outgoings and increasing your income.

Spend a little time to save a lot of money! 

3 Books on Debt and Saving to Consider

As we are at the end of one year and about to start the next I thought it would make sense to suggest some other reading that might help out with your understanding of how to reduce debt.  There is plenty of advice out there, these three new books look good though.

Here's to a great 2011 and hopefully an elimination of all your debts.

Spend a little time to save a lot of money! 

Which Debt To Ditch First

You may have a number of debts that need paying off and it's always a tough decision on which to try and get rid of first or whether to 'chip away' at them all at the same time.  Everyone's circumstances are different but here are a few things to consider:

Debt Size

Which of your debts is largest?  It may sound strange but if the interest rate is low and it's over a long period, such as a mortgage, there may be other debts that can be tackled first.

Debt Period

Your debts will be over a set time period, some will be longer than others.  Just remember that the longer you take to pay off your debt the more you will pay.  This can be a difficult one, depending on size of debt.

Debt Interest

Which debt has highest interest payments?  Short term lending such as credit or store cards tend to have high rates of interest and are, on balance, worth tackling first.  As a first target - get your credit card balance down to zero and see how much you save each month!

Thinking about all your debts in these simple terms - just list them - can help you decide how you go about paying them off.  Remember, some debts may not allow you to pay off early (some loans) but it's always worth negotiating with the lender.

Spend a little time to save a lot of money!