Setting debt milestones can increase the chances of succeeding at debt consolidation. At a time when debt is steadily climbing, it seems like a lot of consumers are struggling to pay back what they owe.
Experts believe that higher consumer spending and more frequent use of credit are signs that the economy is doing well. However, these can only signify a better economy if the consumers are able to keep up with their payments.
Unfortunately, consumers are failing when it comes to paying what they owe. At least, this is true for some debts. Reports reveal that the delinquency rate of credit cards and unsecured personal loans have increased over time. Only mortgage loans have a lower delinquency rate while auto loans remained the same. The delinquencies refer to those that are more than 60 days late (90 days for credit cards).
When people start to default on their payments, you know that is not a good sign. You need to get serious by getting into a debt consolidation program.
Most of the time, people start their debt relief program with so much energy. But as time goes on, they falter in their efforts because of certain issues and challenges that were not present when they started. For instance, when you started consolidating debts, you were earning and spending a certain way. Over time, you will go through changes in your life that can affect your financial position. It can be a lower income or higher expenses. Both of these might compromise your ability to pay off your debts. If things get too hard, that might lead you to feel debt discouragement.
When you set debt milestones, you can directly address debt discouragement. These milestones can condition your mind to avoid feeling frustrated about your current financial situation.
Why debt milestones can help with debt consolidation
Debt milestones are like smaller goals that you will set throughout your whole debt relief journey. For instance, if your debt consolidation program will take 2 years to complete, you can set a milestone after successfully paying your dues on time for 6 months straight. Or it can be based on an amount that you have paid off. If you owe $50,000, you can set a milestone for every $5,000 that you successfully pay off. The idea is to identify these milestones so you can celebrate every time you reach one.
These debt milestones can bring the following benefits during debt consolidation.
It can make the process seem easier
First of all, it will keep you from feeling like your debt is such a huge burden. According to studies, celebrating success will release endorphins inside your body that will make you feel good. When you feel good, it reinforces the feeling of accomplishment. It gives you the right behavior to face and complete another milestone. It does not just influence your behavior but also your mindset. With the right state of mind, you can easily overcome anything.
It can make a long repayment seem shorter
Instead of thinking that the 2 years that you have to spend paying off your debts, you can focus on the first 6 months. You do not think about anything else except that time frame. When you focus on the 6 months instead of the 2 years, the task does not seem too much to overcome. You will feel like your debt will not really take a long time to complete.
It can give you something to look forward to
Think about it like running a race. It is easier to run if you can see where it will all end. You can focus on something instead of wondering when it will all end. You can gauge how you will use your energy during the run. Will you pace yourself and only give it your all when you are near the end? Or will you go all the way regardless if you risk total exhaustion? This is something that you can implement while completing your debt consolidation program. Having a milestone to look forward to will make planning easier to do.
It can make the process less stressful
Finally, having debt milestones during debt consolidation will keep things from feeling too stressful. After all, your debt relief program is cut into smaller milestones. If you focus on each part, your debt problem does not seem as significant as when you started. As long as you keep going after the next milestone, you will soon find yourself on the last leg of the debt consolidation program.
How to set up debt milestones
Now that you know how important debt milestones are, you need to know how to set them up. You want to do this correctly because it can be a great tool to help you achieve complete debt freedom.
Here are some tips you can follow.
Identify what will motivate you
Is it the idea of completing a payment? Or is it more of knowing how much you are saving? People have different perceptions and preferences. This is why you need to set up debt milestones that suit your personality. If you like to know how far you have come, highlight that in the milestones you will set up.
Divide the whole repayment program
Once you know what you will use in your debt milestones, you start dividing the repayment plan of your debt consolidation program. As you create a debt repayment timeline, you need to identify manageable milestones that are not too easy but also reachable.
Think of a cost-efficient reward that can excite you
After you have complete the repayment plan and identified the debt milestones, it is time to choose a reward. Whenever you reach a milestone, you should celebrate that achievement. To avoid splurging, you need to set the rewards beforehand. It does not matter what it is – as long as it excites you. Of course, you have to make sure it will not cost you a lot. You want to make sure you are being smart with how you spend your money. Your priority right now is paying off debt. Make sure your finances will not be used on something else.