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An albatross around your neck. A monkey on your back. Whatever you call it, consumer debt can be a huge burden. While there are a number of different debt reduction strategies out there, I wanted to take a moment to highlight a useful technique that my pal NCN used to dig his way out of debt: micropayments.
Taking a step back, most debt reduction strategies involve ranking your debts (smallest to largest, highest to lowest interest, etc.) and then throwing everything you can at the top-ranked debt while making your minimum payments on everything else. This is all well and good, but what if you want to pay things down even faster?
Enter micropayments… In short, pay what you can afford, and then scrape together whatever else you can during the month and send in multiple, smaller payments to your creditor of choice. Believe it or not, NCN got to the point where he was sending Citibank an extra $5 each and every day via online billpay. By making a game out of finding an extra $5/day, he managed to stay motivated and slay the debt beast well ahead of schedule.
Beyond helping you pay things down extra fast, this approach helps you push your debt reduction limits without getting overextended. If Murphy pays you a visit, you can easily ratchet back on your micropayments and keep your head above water. But if not, it’s full speed ahead.
Not sure where you can come up with a few extra bucks? Get creative. Skip your morning Starbucks, carpool once a week, sell some stuff on eBay, pick up a paper route, do paid surveys online, start a weblog, have a garage sale, etc. Whatever you do, channel that extra money toward your debts. Before you know it, you’ll be out of debt and saving for the future.
Sound good? Then be sure to check out NCN’s post. You should also note that the same concept can be applied to savings goals. And for a more recent take on the micropayment concept, check out the “snowflaking” primer over at paidtwice.