How A Silly Little Experiment Helped Me Get Out Of Debt
I once sent a credit card company $5 per day, every day, for a month. Seriously.
The year was 2005 and I was in full on debt reduction mode. Pumped up by the comments left by my readers – and ready to be debt free – I spent most of my waking-hours thinking about ways to reduce my debt.
Somehow, the thought struck me: What if I manage to save $5 a day – say by skipping my morning trip to the convenience store or brown-bagging lunch – how quickly could I put that $5 to work?
I decided, just to see if it would work, to use online bill-pay to send a series of $5 payments to the credit card company. I scheduled the payments, one right after the other, for each day of the month. Every other day or so, I would check my credit card balance (online) and, sure enough, my balance was going down, $5 a day.
At the end of the month, I managed to reduce my credit card balance by an “extra” $150. The silly little experiment worked!
Now, am I suggesting that anyone else do this? Not really. In fact, I’ve heard that some credit cards actually limit the number of payments that they’ll process during a billing period. Nevertheless, I do think that my silly little experiment was valuable, in that it taught me the power of micro-payments.
I’ve mentioned micro-payments before – those small payments, sent throughout the month, which help to reduce the average daily balance in your account. These payments are made after regular minimum payments and are in addition to the extra payment one might send while getting out of debt.
Not only did I learn the value of micro-payments, but I also learned that money management is about much more than just dollar signs, percentage points, and mathematical calculations. Money management is about keeping your head in the game and staying focused on specific goals. Each day, as I logged in to my checking account and scheduled another payment – that was one more day where I had successfully saved $5. This $5 was above and beyond my regularly budgeted-for debt reduction payment. This $5 required a change in my habits.
For thirty days, instead of focusing on the big-picture, I focused on the very, very small things. If I wanted a soda, I had to remember the $5. If I wanted a newspaper, I had to remember the $5. If I wanted to rent a movie, I had to remember the $5. This silly little experiment (which, in the end, wasn’t really all that sill), helped me learn the value of every dollar that comes in to my life.
If I had it to do all over again, here’s exactly what I would do – and it’s what I do when making micro-deposits to my savings account:
1. I would set a goal of saving $5 each day.
2. At the end of the week, I would send a micro-payment (or micro-deposit) of $35.
3. A couple of days after sending the micro-payment, I would check my credit card balance, just for that emotional boost that comes with seeing my debt reduced.
The month after my silly little experiment, I went back to my standard practice of making my minimum payments to all accounts, making an extra payment to the first account on my debt snowball, and then I made four micro-payment throughout the month.
Micro-payments rock and they really kept me motivated. Have you used micro-payments? If so, leave a comment and let us know about your experience!
One final note – All of these payments were initiated by me, using online bill-pay. I never game the credit card company access to my checking account. In other words, my bank was sending a payment to the credit card company. The credit card company was not “pulling” money from my checking account. And, obviously, this micro-payment thing probably won’t work if you are sending payments via paper check from your house. The postage cost would be too high.