Take Control of Your Debt by Setting a Time Goal

by Joe Plemon on December 12, 2011

You CAN erase that debt!

How do you feel when your bills pile up on you?  Overwhelmed?  Out of control?  Hopeless?  Even when you start making progress, do you run out of steam?   Is “getting started” something that you continually postpone?

Yes, debt bondage can be overwhelming, but setting a time goal will help you take control of your debt.  Believe me: you can do it.    Furthermore, once you get started, you will gain momentum instead of running out of steam.

How do you set a time goal?  Follow these five steps: 

 1. Make a Cash Flow Plan

Yes, that budget is absolutely essential.  You must know where your money is going before you can even think about setting a time goal.  If your budgeting experience in the past has been less than stellar,  read Five Budgeting Pitfalls to Avoid.  You can do this.  Get started.

2. Calculate how long you will be in debt if you keep doing what you are doing.

Stick with me here … it’s not all that hard.  Let’s say this is your situation:

You owe $5,000 in credit card debt.  Payments are $100 a month at 12% interest.

You owe $11,000 on your Honda.  Payments are $480 a month at 7.5%  interest.

You owe $20,000 on your Ford.  Payments are $470 a month at 8% interest.

At this rate, the Honda will be paid for in 25 months, the Ford in 50 months and your credit card in 70 months.  But you will actually get out of debt earlier than 70 months (unless you get car fever) because once your Honda is paid off you will use that payment on other debt.  Right?  In 25 months you will owe $10,900 on your Ford, and $3600 in your credit card, so you add the $480 you were paying on the Honda to the $100 credit card payment and it will be gone in 7 more months.  Still with me?  Now you add the $580 to the $470 Ford payment (you will owe $8,000 at that time) and you will be debt free in 8 more months: a total of 25 months + 7 months + 8 months = 40 months.

 3. Set your time goal.

Most people, if they aren’t OK with the 40 month timeline, will look first at ways to cut the budget.  That is not a bad idea, but I want to challenge you to first set a time goal and then figure out how to accomplish it.   Why does setting the time goal work better than examining your budget?  Because doing so will kindle creativity whereas looking at your budget stifles creativity. I recommend trying for a time goal of two years or less.  Why?  Because the 24 month time period, psychologically, is “doable”.   Any time frame over the 24 months may become so distant that you might lose hope.  Did you feel that way when you read “40 months” in the previous paragraph?  See what I mean?

4.  Figure what you need to do to accomplish the time goal.

Obviously, you are going to need to make bigger payments to get rid of the debt quicker.  But how much will it take to do it in 24 months?

In this case, I did the math for you: you will need an additional  $600 a month.   Did your eyes pop out?  Don’t despair.  Now is the time to do what we said we were going to do: think outside the box.

 5. Time to get creative.  These tips will help you find that $600 a month:

  • Scrutinize your budget

How much are you spending on eating out?  Going to movies?  Christmas gifts?  This is where you learn just how badly you want to get out of debt.  Can’t find an additional $600?  How much did you find?  $300?  OK, we still need another $300.  Read on.

  •  Check your tax refund.

How much refund did you get this year?  What did you do with it?  If your answer is that you got $4000 and you don’t know what you did with it, you have just found your additional $300 a month.  Change that W-4 and start bringing home your money instead of loaning it to your Uncle Sam.  But if that won’t work, read on.

  • Use your “extra” paychecks. 

If you get paid every two weeks, you are getting three paychecks every sixth month.  If you are paid every week, you are receiving five checks every third month.  What do you do with those extra checks?  If you don’t know, now you do: apply them to debt.  Those extra checks equate to an entire month’s take home pay every year.  If, for example, you normally bring home $2400 every month, you just found an additional  $200 a month to use on your debt.

  • Extra job.

An extra job, just for the 24 month period, could easily bring in the $600 you need.  In fact, once you start that extra job and apply every penny of it to debt, you will probably get out of debt in less than your 24 month goal.

  •  Sell one vehicle. 

If you were to sell the Ford for $20,000 and buy a $3,000 car, you have just reduced your debt from $36,000 to $19,000.  Continue paying the $1050 a month you are paying now and you will be out of debt in only 20 months.

  •  Work overtime

Do you have overtime opportunities?  Take them!  Every penny going against your debt will help you toward that 24 month goal.

  •  Cash out your whole life policy.

Do you have any cash value in your whole life policy?  If so, consider replacing your whole life with a term policy.  I recommend talking to a financial counselor before making this decision, but if term life is right for you, use that cash from your whole life to reduce your debt.  A bonus: you could also apply the savings in your monthly premiums to your debt.

  •  Tap your savings. 

How much do you have in savings?  I bet it isn’t earning nearly as much interest as you are paying on your debt.  Don’t use it all; you need a small emergency fund.  But if you have $10,000 in a savings account, you could use $8,000 immediately on debt (pay the credit card off first) and you have reduced your total debt to $28,000.


Getting out of debt requires sacrifice; it is never easy.  However, if you can set a time goal and make up your mind that you are going to do whatever it takes to achieve that goal, you will do it.

 The key is to get started.  Today is a good day.  Go for it!


{ 10 comments… read them below or add one }

Money Beagle December 12, 2011 at 10:41 am

In your example, those are some pretty big numbers and even decent progress would make the number seem pretty daunting for quite some time. I’ve always thought that a necessary part of any ‘big debt’ payoff is to set intermediate goals, so that you can celebrate milestones along the way. This keeps you motivated and keeps things more attainable than ‘one large’ goal that might be years away.


joeplemon December 12, 2011 at 6:21 pm

Money — I am hoping that our readers (or this fictional couple), by setting a time goal of 24 months or less, would be so motivated that they might not need to set many intermediate goals. Yes, that huge debt seems daunting, but breaking the debt down and creating a time goal gives a bit of light at the end of the tunnel. Even so, I agree that if this couple set a 12 month intermediate goal and celebrated at that milestone, they would be more motivated to finish it off in the next 12 months.


Alex Humphrey December 12, 2011 at 10:48 am

This is fantastic, Joe!

The problem for most people is the fear that comes with that level of debt. It’s too far away, the sacrifices are too big, etc.

I love your method because it is taps into an interesting law of human nature: when we’re forced to do everything in a short amount of time, we tend to pull it off.

Not sure why it’s true, but for most people, when you have a short time to do a huge task you’re significantly more likely to complete it.


joeplemon December 12, 2011 at 6:23 pm

Thanks. You are exactly right: if we believe we can do something in a short period of time, we will tie into it and get it done. This is not exactly the same thing, but when I went through basic training for the Army, I told myself, “Joe, you can endure anything for eight weeks. It really helped!”


Corey @ Passive Income to Retire December 12, 2011 at 12:51 pm

Great tips. I have found that it is also a good practice to be flexible – not to the point where you just forget your goal, but where you don’t beat yourself up too much if you slack off just a little bit.


joeplemon December 12, 2011 at 6:26 pm

Corey — Yes, flexibility is crucial because in real life, stuff really does happen. If one rigidly sets his goals, he (like you said) will tend to beat himself up when the transmission goes out of the car or when an unexpected medical emergency or when one of a million other things happens.


Harry December 12, 2011 at 6:00 pm

Great advice on goal setting.

You may want to check out http://www.GoalsOnTrack.com, a very nicely built web app designed for tracking goals and todo lists, and supports time tracking too. It’s clear, focused, easy to navigate, worth a try.


joeplemon December 12, 2011 at 6:28 pm

Harry — Thanks for the tip!


krantcents December 12, 2011 at 7:46 pm

You certainly laid out a proactive plan to do something. The question is always how badly do you want to do something? It is not that different from breaking a habit or going on a diet! Soon we will set New Years Resolutions again. Those resolutions need a solid plan to make it happen.


joeplemon December 13, 2011 at 8:52 am

Krant– Agreed. A resolution, be it get out of debt or go on a diet, is pretty worthless without a plan and a strong desire to make the plan work. Many people, unfortunately, wait until they are in crisis before taking action. But even that can be good, because they are finally motivated.


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