I recently met a new friend, Tom, through an introduction at a party. Tom is a graduated from college 4 years ago and when I told him I have a credit card review site and personal finance blog, he started talking to me about his student loans that he has to repay and the credit card debt that he has got into during his college years.

Tom told me that when he graduated, he was saddled with about $40,000 in student loans and credit card debt. It was up to his eyeballs and he just did not know how to reduce them in the beginning. But four years later, he had cut his debt by half and it now stands at about $20,000.

Tom said that one of the most important things he did was to actually breakup his debt reduction goals into biweekly and monthly goals. He felt that if he was staring and thinking about the whole amount, he would simply get discouraged and lose his spending discipline. So what he did was to break them down into monthly goals.

To arrive at his monthly goal, Tom set out a detailed budget based on his monthly salary. He made a point not to accumulate any more credit card debt or any other debt for that matter. He had to make some sacrifices. At certain points during the last four years, he had to take a second job and moved in with his parents for a short period. But his goal was to reduce his debt by $500 a month.

It has not been a comfortable ride. Instead, there are lots of sacrifices. Unrepaired stuff in the apartment, driving around a really beat up third hand car are just some of the sacrifices he is making. But Tom does not want to take another four years to get rid of his debt. Hence, he is planning paying off his debt faster.

Tom says that by just focusing on monthly debt reductions, he is essentially taking a big burden and breaking them into “smaller burdens”. By consistently meeting his monthly target, it motivates Tom even more and reinforces his determination to reduce his debt even faster. Tom also does not feel as burdened as before because he knows that if he can just repeat what he is doing every month, he will be out of debt before he knows it. Paying off his debt is as Tom says a “monthly routine”.

This entry was posted on Thursday, February 22nd, 2007 at 6:23 am and is filed under Credit Card Debt, Debt Reduction, Tips and Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.