About a month after I hit bottom in terms of my debt, I sent in a large payment on one of my credit cards, a big enough payment to completely eliminate the balance. That money had come from a lot of things: eating very cheaply for a while, selling off a bunch of DVDs and video games, and a little bit of freelance work.
I still remember how I felt when I put that envelope in the mailbox. I felt a bit queasy in my stomach, knowing how big that check was, but I also felt very, very excited. A debt was gone. Gone! And I had done it myself, through my own efforts.
What was most surprising is that the first little taste of success didn’t encourage me to go out and buy something to celebrate. What it actually did was make me want more of that success. I burned with an even stronger desire to pay off the rest of my credit cards, to pay off our car loans, to pay off my remaining student loans, and so on.
That first little taste of success made me want to eat the whole enchilada. And it’s been tasty all the way along.
A lot of people like to criticize Dave Ramsey and his “Total Money Makeover” because he recommends paying off the debt with the lowest balance first instead of paying off the debt with the highest interest rate first. In terms of pure math, Ramsey’s method is not optimal – the mathematically optimal way is to always go for the highest interest rate first, then work downwards.
Sometimes, though, it’s valuable to look beyond numbers. When I go back to my first taste of financial success, I’m reminded of how powerful I felt when I slipped that envelope in the mailbox. I felt, for the first time, like I could actually do this. My recovery from debt went from seeming like an almost-mythical goal to something I could actually do. And I wanted it. Bad.
That success provided the fuel that I needed to keep going, to keep pushing, and to eventually start sharing my experiences here on Money360.
And that first debt I paid off? It wasn’t the mathematically optimal one. Instead, it was the one with the lowest balance (which wasn’t really all that low to begin with). I chose that debt because it was the one I knew I could reach and I was desperate to feel some kind of success. That taste of success was the fuel for the rest of it.
What if I had adamantly subscribed to the best move in terms of math? I honestly am not sure. I’d like to believe that the pain I felt holding my son and wondering about our future would have been enough to push me through, but I also remember how difficult that first month was: sitting down and really looking at our financial state, selling off a lot of collections I had spent years building up, having some hard conversations with my wife, trying to break some difficult spending habits.
When I put that envelope in that mailbox, I really needed a big boost of motivation, and the idea that I really had eliminated one of those debts made a huge difference. Would a big partial payment had the same impact? It might have had some impact, but I don’t believe it would have provided the fuel I needed to keep going. My best hope is that it would have kept pushing me enough to get rid of that big debt and that would have pushed me onward, but I don’t know if that would have happened.
So, what do I suggest for all of you who are out there trying to figure out how to turn things around? Pick one target – one that you can only reach if you push yourself almost to the limit. It might be your biggest debt, or it might be a smaller one. But focus on that goal – and knock it down. The feeling you get from victory is tremendous, and it might just fuel you on to turning everything around.
Don’t overlook the value of a strong motivator. It can make all the difference between success and failure.