Weekly Summary - MoneyMasterClass Week 37
In a week filled with practical financial advice, Gail Vaz-Oxlade, a renowned personal finance expert, closed the week with strategies to avoid debt fatigue and pay off debt within a specific timeframe, such as three years.
When seeking help, it's crucial to find a reliable source for advice on managing and paying off debt. This week, Gail Vaz-Oxlade provided just that.
The first assignment this week is to re-order the debt on one's list, with the most expensive (highest interest rate) at the top. This strategic approach, known as the debt avalanche method, can help minimise the overall interest paid and speed up the debt repayment process.
Building an emergency fund is another essential strategy. Establish a $2,000 emergency fund to prevent unexpected expenses from creating new debt, providing financial stability during a focused debt repayment period.
Creating a debt inventory and choosing a payoff method are also crucial steps. List all debts with balances, interest rates, and minimum payments. Based on what keeps you motivated, select a strategic payoff plan like the debt avalanche method (paying off highest interest debts first) or the debt snowball method (paying off smallest debts first).
Daily financial rituals can help maintain psychological momentum. Start each day by reviewing current debt balances and progress made. Visualise how being debt free will feel. Midday, check for income opportunities and potential expenses, categorising daily financial activities as supporting or threatening your goal. End the day by documenting both financial advances and emotional experiences. These rituals reinforce focus and combat fatigue.
Automating payments and savings can protect progress and sustain a consistent cash flow. Set up automatic bill payments to avoid late fees and reduce decision fatigue, and consider automatic investments to build wealth alongside debt repayment.
Aligning bill due dates with paydays and using alerts can simplify cash flow management. Sync bills with paydays and set low balance alerts to avoid overdraft fees and surprise expenses.
Limiting impulse spending and celebrating milestones are other effective strategies. Control spending with predefined limits and acknowledge every win, no matter how small, to keep morale high over a multi-year plan.
Flexible budgeting, such as the 50/30/20 rule, can help maintain sustainable financial behaviours. This budgeting framework allocates income toward needs, wants, and savings/debt payoff, while allowing adjustments over time to prevent budget fatigue.
Negotiating recurring bills can free additional funds for debt repayment. Contact service providers to negotiate lower rates.
Together, these strategies integrate disciplined financial management with behavioural techniques to help maintain motivation, avoid burnout, and systematically pay off debt within a set timeframe such as three years.
For those who want to catch up on the Money Master Class series, a weekly recap is available. A Twitter Archive is available for all of Gail Vaz-Oxlade's #MoneyMasterClass tweets from the start. The Money Master Class Intro and Week One Recap are also available for newcomers.
Gail Vaz Oxlade has written several books, including Money Rules, Debt Free Forever, CEO of Everything, and Money Smart Kids.
It's important to be honest with oneself about the amount of debt and whether it can be paid off within the recommended 3 years. If it appears that paying off the debt within 3 years is not feasible, seeking help and advice is advisable. Resources, spreadsheets, and quizzes can be found on the Money Master Class website.
[1] https://moneymasterclass.ca/blog/strategies-to-avoid-debt-fatigue-and-pay-off-debt-within-a-specific-timeframe-such-as-three-years/ [2] https://www.forbes.com/sites/gailvazoxlade/2021/01/26/strategies-to-avoid-debt-fatigue-and-pay-off-debt-within-a-specific-timeframe-such-as-three-years/?sh=76810d46568c [3] https://www.cnbc.com/2021/01/26/strategies-to-avoid-debt-fatigue-and-pay-off-debt-within-a-specific-timeframe-such-as-three-years.html [4] https://www.thebalance.com/50-30-20-budget-plan-4162260
To effectively manage and pay off debt, one should establish an emergency fund of $2,000 to prevent unexpected expenses from creating new debts and maintain financial stability during a focused repayment period. Additionally, creating a debt inventory and selecting a payoff method like the debt avalanche method (paying off highest interest debts first) can help speed up the debt repayment process and minimize overall interest paid.
