The 3 Ms to Paying Down Debt

Financial Goals

Erasing Debt

You’ve resolved, yet again, to pay down some debt this year. Want to increase your odds of success? Then make sure your plan includes all three of these key ingredients: motivation, money and method.

Here are the Cliff notes.


Losing weight, losing debt, spending more time with your family: If you want to change your life, you’ll have to change your habits. And changing habits is no picnic; it requires strong motivation.

So, find something compelling to motivate you. I’ve lived debt-free for many years now, and here’s what motivates me: the realization that for every hour of my life that I swap for money (i.e., working) I’ve forever lost an hour of my life. Time is our only nonrenewable asset, so my goal is to spend as much of it as possible doing what I want to do and as little as possible doing what I have to do.

What does that have to do with debt? Everything. Because paying interest is a double-edged sword; it not only wastes money, it carries a high opportunity cost. Opportunity cost is accounting jargon for what money you spend today costs you in terms of the opportunity to have more money tomorrow. Let’s bring the point home with a simple example.

Say you borrow $100,000 with a 9.4%, 30-year loan and make minimum payments. You’ll make 360 payments of $833, for a total of about $300,000: $100,000 in principal and $200,000 in interest. If you earn $30 an hour, that means the interest bill alone totals about 6,700 hours of work: more than three year’s worth.

The real killer is opportunity cost. If you saved $833 a month for 30 years instead of spending it, and earned 9.4% instead of paying it, you’d have ended up with about $1,600,000. Translated into work hours, at $30 an hour, that’s 53,000 hours or about 26 years.

Of course, we can’t know the true opportunity cost in our example until we know what you did with the $100,000 you borrowed. Maybe you invested it into a business that’s going to be worth billions. However, one thing’s for sure, debt incurred to pay for things that go down in value (such as virtually anything that you can buy with a credit card) means huge opportunity cost, which in turn steals from you the most valuable thing you have: your life.

This is my motivator: what keeps me out of debt. However, if that’s not motivation enough for you, find something that is because without strong motivation you’re probably doomed to failure. Of course, motivation alone won’t do the job. You’re also going to need…


The more extra money you can find in your budget, the faster you can be debt-free. Step one in finding it is to use a spending plan (i.e., budget) to track where your money is going now. Then, see where you can save. When you do, don’t launch into a “dollar diet” and deprive yourself of the things you love. Deprivation doesn’t work. Instead, decide what really makes you happy, then try to spend less doing those things. Impossible? Not at all. Eating an appetizer at home, then splitting an entree at the restaurant is still eating out. The books at the library are no different than the books at Barnes & Noble. I drive an $85,000 Mercedes, but I bought it “pre-owned” for $20,000.

I could go on. Suffice it to say, no matter where your money’s going now, there are ways you can save without sacrificing quality of life. I know because I don’t just write about this stuff, I live it. With the exception of a small mortgage, I’ve been debt-free for nearly 20 years and have accumulated more than a million dollars in savings as a result. And nearly all of it has come from saving small amounts where I can and investing those savings sensibly.

So, if you’re looking for savings, here are the ABCs: A) Ignore what society and commercials are telling you. Make a list of what you really want or need; B) Stop spending on things that aren’t on it; C) Explore ways to save on things that are.

And once you’ve found some extra cash, all you need is…


Pick a system for destroying your debt and stick with it. When it comes to ranking debts for pay off, the method I advocate is called snowballing.

Snowballing means ranking your debts for payoff, then focusing every spare dollar on the first debt on your list till it’s dust. Then, using that old debt payment to help pay off the next debt on the list — and both those old payments to pay off the third debt on the list, and so on. You continue snowballing old payments until you’re debt-free. Then you invest the total of all your old debt payments every month and watch your wealth snowball as compound interest starts working for you rather than against you.

The bottom line? Destroying your debts is doable and it will absolutely change your life. Work it and it will work for you.

The 3 Ms To Paying Down Debt Provided by AskMen.

Leave a Reply