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Debt Management

Sort out one thing first

‘Sort out one thing first’ – I can’t remember which TV personality and personal fitness expert I heard this from, but I think it can apply to many areas of your life, including your financial one.

The point that this fitness expert was trying to make, is that from his experience, most people that are starting off, are trying to accomplish so much at the same time, and end up giving up because they’ve burned themselves out. They’ve taken on too much, overcomplicated things, spread out their energy too thin. They start off with good intentions: they work religiously to track their exercise routines, and/or count calories and/or protein intake… And after we expend all that time and energy, we complain about how hard it is and ponder if it’s really worth it? But everything takes time and a certain amount of focus.

But when we end up trying to focus on too many things, we’re not really focusing at all

Focus is key

So, let’s say you have tons of debt, little-to-no-savings, and never mind investments. Do you throw your eggs all in one basket, tackle your debt first and deal with all the rest later? Or do you try and figure out how to get rid of your debts, save more, find ways to increase your income and invest all at the same time?

Having too many baskets can be just as bad as having one. When you try to spread out your money too thin, it ends up not being enough and not meeting any of your goals. And that’s where plans can derail. Now, don’t get me wrong, I’m not saying we should focus on one thing and one thing alone. Everyone has or should have more than one goal that they’re working on. But it’s about finding out what’s most important to you and making that one goal your priority.

I keep thinking about that Pareto rule or the law of the vital few, which states that 80% of the results come from 20% of your efforts. So if we’re focusing mainly on financial goals, try and determine which goal will net you the best results and work on accomplishing those first. Maybe 80% of your discretionary income goes toward debt repayment and the other 20% is divided amongst your savings, investments, donations and fun stuff. If you have multiple debts, try applying this principle to your highest-interest debt or the one that’s going to return the greatest benefit for you and focus the majority of your energy on that. Or maybe it’s closer to 75-25. Do what works best for you, but put the majority of your efforts into one goal and sort out that one thing out first.

Breaking it into smaller tasks

Do you ever watch those organizing/decluttering shows? I love them! I wish I was that organized sometimes. But one takeaway or pointer that every single show seems to make is before they even start, they take everything out of the room and decide what’s staying and what’s not – what’s important and what’s not. Then they take what’s left and prioritize what they need to do and break them all down into smaller tasks. Makes sense. Cleaning a whole house or office may seem daunting at first, but when you break the room into smaller pieces – say clean out one category of items or your filing cabinet today, another tomorrow, you’ll feel like you’ve actually made progress.

Finances can be daunting too when looked at as a whole. Many fear tackling their debt, or investing, or building an emergency fund, partly because they’re flipping to the last page of the book without actually reading it. Only paying attention to how many pages they have left to read. That’s why books are broken into chapters, and that’s why you should break your own financial obligations up into smaller, more manageable tasks and take it one page at a time.

In parting, I’m reminded of a phrase Mahatma Gandhi once said ‘action expresses priorities‘. If you’re not working towards achieving that goal, then maybe it’s time, to be honest with yourself and reassess what your real priorities really are. And work towards them with gusto!

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