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Dave Ramsey places a lot of emphasis on the Debt Snowball, or paying off smaller debts first so that you keep up your morale.  Obviously, since Dave Ramsey is a financial God to many, I’ve heard a lot about this.  I can’t quite wrap my head around the idea of paying more interest then necessary.  Plus, if you have one large financial burden (like $100K+ in student loans) then this wouldn’t help you in making progress because there are no smaller debts.  So, I’ve been considering how I want to set my goals as far as debt payoff.

I’m teaching a GRE course that discusses the psychology of test taking, and one of the big components is setting specific goals.  A person who simply says “I want to do better” will not do as well as a person who says “I want to improve my score by 200 points.”  So, it stands to reason that if I just say “I want to get out of debt” that isn’t a clear enough goal.  Even saying that I want to get out of debt in 3 years isn’t clear enough because it is too wide a time range, and because it will be too hard to stay motivated for the entire 3 year period unless I have benchmarks along the way.  

• Set challenging but attainable goals

A goal that is too lax will not motivate you enough to succeed as quickly as possible.  A goal that is too difficult to achieve will only end up discouraging you and you may give up.  The key is to create specific goals that will stretch your abilities, but only within a reasonable level.

• My Goals

My overall goal is to pay off about $100,000 in 3 years of my debt, and close to that of fiances debt, so around $200K in 3 years.  Right now, we have $1100 a month in minimum debt payments, and we pay about an extra $1500 a month.  When my income increases to closer to full time, we’ll be able to pay an extra $2000 a month.  So, around $3000 a month total allocated to debt repayment, or $108K in 3 years.  Thats considerably less then $200K.  However, I am hoping that both of our incomes will increase.  

I am taking some specific steps to increase my income.  I am trying to get my company off the ground (I have one customer so far).   I am trying to look for alternate sources of income I can do from home (like freelance writing).  I am planning to coupon shop and have garage sales a few times a year to bring in some extra money.  Fiance’s job is more specific and he is trying to establish a career, rather than just make money.  He is just hoping that if he excels at his job he will earn raises, and this is the best thing for him to do as a long term plan.  I’m also trying to decrease our spending.   

So, I’ve broken this down into a very specific, somewhat difficult, but hopefully attainable goal.  I want to pay $3500 a month towards our debt.  This would put us at $126K repaid in 3 years.  Its not where I want to be, but should be attainable with hard work.  Its specific, not easy but feasible.  The time frames are small enough that I can track my progress towards achieving the goal.  And, I’m going to do it here on this blog.  Wish me luck!