Small Steps Can Lead to Big Changes

When it comes to overcoming debt, a different approach can make all the difference. In today’s unpredictable economic climate, achieving financial security is more crucial than ever. One effective path to greater security is reducing your debt, but let’s face it, that’s easier said than done.

As a financial planner with a deep interest in human behaviour, I’ve observed how our emotions often guide our financial decisions. This connection is key when tackling debt, which is typically a gradual process. Without careful planning, it’s easy to fall into a cycle of paying down debt only to accumulate it again.

That’s why I advocate for a unique approach to debt repayment—one that’s designed to keep you motivated and emotionally engaged throughout the process. It’s called the Snowball Method, and it’s all about letting small, consistent decisions build up to make a significant impact.

Don’t Let Fear Hold You Back

The first step in this journey is to confront your financial reality. You must begin from your current situation, not where you wish you were. While you can’t change the past, you can make different choices moving forward. Your past financial behaviours don’t have to dictate your future—you have the power to choose differently.

Start by understanding your financial picture. Create a spreadsheet that lists each of your credit cards or loans, including the outstanding balance, minimum monthly payment, and interest rate. Then, take action to secure the best possible interest rates. Contact your creditors to see if they’ll reduce your rates.

Next, it’s essential to create a budget where your income exceeds your expenses—you need a surplus at the end of each month. This might require some sacrifices but keep your long-term goals in mind. Those sacrifices will be worth it.

Why Debt Consolidation May Not Be the Answer

I generally advise against debt consolidation—combining all your debts into one loan or credit card, even if it offers an interest-free period. By keeping your debts separate, you give yourself the opportunity to celebrate each victory as you pay them off. These small wins are crucial—they provide a sense of accomplishment that keeps you motivated.

Consolidating your debts pushes that feeling of success far into the future, which can be emotionally challenging and harder to sustain.

How to Gain Momentum

With your debts listed in your spreadsheet, organize them from the smallest balance to the largest—not by interest rate. Set up automatic payments to ensure that at least the minimum amount is paid on each debt every month, avoiding additional fees.

Now, to start snowballing your debt, focus all your surplus funds on the smallest balance. The goal is to pay off that debt as quickly as possible, giving yourself a quick win and a boost of motivation. This dopamine rush will help you stay committed to your plan and avoid the temptation to fall back into debt.

When you’ve cleared your smallest debt, take a moment to congratulate yourself—this is a significant achievement. Then, move on to the next debt on your list, repeating the process until each debt is eliminated. With every step, you’ll feel a little more liberated.

By consistently applying the Snowball Method, you’ll gradually reduce your debt, improve your financial security, and experience the emotional rewards of progress. This approach isn’t just about numbers—it’s about empowering you to take control of your financial future, one step at a time.