Here’s a quick tip that will help you get out of debt or increase your savings without worrying if you will have enough money to last until your next paycheck.
Instead of sending ALL of your extra debt payment at one time, send multiple debt payments throughout the month.
I used this technique when I was getting out of debt, and I had great success with it. Let me show you an example.
Suppose you have the following monthly minimum debt payments:
Automobile Payment: 500
Credit Card Payment: 100
Personal Loan Payment: 200
Every month, you are already committed to paying a minimum of 800 dollars towards your debt. Now, let’s assume that you have decided that you can afford to send 200 dollars extra towards your credit card payment. You have a choice to make. Will you send a single 300 dollar payment to your credit card company, or will you send a 100 dollar payment to cover the minimum, and then send a 200 dollar payment (later in the month) as your extra payment?
Most people who decide to get out of debt will send the single 300 dollar payment, and if that works for you, awesome! But, others will send the minimum payment, and promise themselves that they will “save” 200 dollars during the month, and send it in later. Inevitably, “life happens” and you fail to save the 200 dollars, so you do not make any extra progress towards debt reduction.
I came up with a “compromise” solution. If you are worried that you cannot “afford” to send the entire 200 at one time, but you know that you have a history of not “saving” the extra 200 dollars, try the following. Send MULTIPLE, smaller, extra payments. Instead of sending 200 dollars at the first of the month, send 50 dollars per week for an entire month. Or, send 25 dollars every 3 or 4 days.
You can use online bill pay to send multiple monthly payments. (Do NOT use this method if you are sending stamped mail, for obvious reasons.) One of the added benefits of this technique? If something comes “up” during the month, you can suspend your extra payments for a week or two, and then restart them once you’re past the temporary setback. Another benefit? You get to see some progress, almost every week, and it will keep you motivated. Plus, and this was something pretty awesome that I found happening over and over as I moved toward debt freedom, you will find yourself sending in MORE money every month than you first anticipated.
Think of it like this: If you budget 200 extra, and you send in 200 extra, then you will more than likely SPEND any additional money that might be freed up during the month. But, if you are sending in multiple smaller amounts, you will be more likely to apply and additional money towards extra debt repayment. Your 200 might become 225, or 250, or even 300.
Try it out, and let me know how it works for you. (I went really crazy at one point, and I was sending Citibank 5 dollars a DAY! I forced myself to find someway to make 5 “extra” dollars a day so that I could send in extra debt payments.)
One last thing: You can actually combine the full extra payment and the smaller extra payments. In the example above, you could send in the full 300 at the first of the month, and then send in smaller amounts during the month as additional money is earned or freed up. I used this combo technique when I was saving up my emergency fund.
(I’d send in my budgeted amount at the first of the month, and then send in smaller amounts throughout the rest of the month. Many people do this with SAVINGS accounts, but you can also do this with CREDIT accounts.)