The 2014 edition of March Madness is just a few short days away, and many of you are probably getting ready to spend hours pouring over your bracket in the hopes of winning your NCAA pool – and possibly even a little cash.
But let’s be honest, unless you have followed all the teams closely, gotten into the minds of the players; the odds are not really in your favour. But sometimes, to get ahead it takes in depth research and looking at the situation from all angles to make the smartest decisions.
It’s the same way with your debt. You can hope and pray you have more than enough left over at the end of the month to pay your credit card bills, or you can work hard like these athletes and turn your debt sentence into a financial Cinderella story.
When March Madness begins on the 18th with the tournament’s first tip off, all 68 teams will have at least one thing in common – they will all be starting with a clean slate and systematically tackling each challenge head on in order to reach the ultimate goal.
So why not apply the same philosophy to your debt?
- Start by listing all of your outstanding debts with the exception of your mortgage. Include credit cards, lines of credit, unsecured loans, automobile financing, student debts, pay advances, outstanding bills, and tax debts, loans from family and friends and payday loans.
- Starting with the smallest balance, prioritize each debt. Don’t worry too much about interest rates, unless two debts have similar balances. In that case, list the debt with the highest rate first.
- Once you have finalized this list, you can get started on eliminating your debts one at a time.
By eliminating the small debts first, you get some quick wins and stay pumped up about paying off your debt. Much like the March Madness tournament, you create a plan that is not always about debt, but rather creating positive behaviours and building momentum to reach your final goal.
In the financial world we call this the debt snowball plan, where the principle is to stop everything except minimum payments and focus on one thing at a time. Once one debt has been eliminated, apply those same funds to paying off the next debt on your list, so that you have compounding payments which will eliminate debt faster.
When you first start tackling your finances one debt at a time, you may feel a little bit like the underdog. But don’t worry, like every team aiming for the final four – your past mistakes don’t matter. You may still make the odd foul on your road to becoming debt free. That’s okay, as long as you stay focused on what’s in front of you.
That’s how the greatest March Madness upsets happen, and that’s how you work on getting out of debt.
While you’re watching the tournament this month, don’t just cheer for the underdog – create your own Cinderella story by getting out of debt and taking control of your financial future.