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Small Steps Create Big Debt Reduction Results

The Average Credit Card Debt in America is $5,474.


Mike was deeply in debt compared to the income he brought home. He had a substantial school loan, was carrying a perpetually increasing credit card balance of over $11,000 and had a car loan. Mike tried to turn his financial life around several times. He would start to make progress but would soon give up. It all seemed so overwhelming, and he wasn’t sure what to do.


Mike came to realization that his current financial path was unsustainable with his current level of spending, and he had to do something. He worried about his finances nearly all the time. So, he decided to begin digging himself out of debt by spending $10 less a week. This would generate an extra $40 a month that he could use to pay down some of his debts. Mike even broke the amount down to spending $1.43 less each day. Surely, he could manage this small task. Soon, Mike crushed his goal and was elated.


A few months later, Mike decided to bump it up to $60 a month. Although this was a little more of a stretch, he accomplished that goal as well. A few months later, Mike had more confidence that he could succeed. He sat down and figured out how to make a lifestyle change that could create more cash from week to week. Filled with confidence from his recent successes, he gave it try. It took a little more work, but soon Mike was paying an extra $120 down on his credit card balance monthly.


Mike did manage to get out of debt a few years later. He felt his small first step was a major contributor to his success. Psychologists would be on board with Mike’s approach. Small, incremental, successful steps can build confidence and create a sequential run of successes—momentum toward your ultimate goal. This is called psychological momentum (PM).


Research on PM published in Harvard Business Review also shows that small sub-goals are very powerful facilitators of forward momentum. Early sequential success builds a person’s confidence and even expands their capacity to achieve goals. A goal-seeker’s success becomes almost automatic, meaning that when a goal-seeker expects to be successful, they typically are.


New research by Szu-Ching Huang (Stanford Graduate School of Business) shows that concentrating on small, achievable goals in the beginning is a great confidence builder, motivator, and facilitator of success. After a person has been working on the goals for a while, the tasks can get tiresome, and at this point, it is beneficial to switch to focusing on the larger picture—such as getting out of debt. For example, a person who wants to lose weight should concentrate on only losing a few pounds in the beginning, and after significant progress has been made, switch to a focus of reaching their overall body-weight objective.


In a Harvard Business study, 158 graduate students were given a goal of writing a certain number of dining reviews on Yelp. Students given the overall goal only accomplished an average of 30% of the requested written reviews. A group of students who were given smaller sub-goals, however, accomplished on average 70% of their goals.


The most interesting study was completed by Albert Bandura and Dale Schunk on grade schoolers (1981). One group of children received a set of goals to complete six pages of math problems on each of their regular math sessions. Another group of students were only told to complete 42 pages of math problems during their math sessions. The students who were given the smaller sub-goals completed all the pages faster and had more accurate answers. Additionally, the sub-goal kids developed more confidence, displayed greater perseverance, and had higher intrinsic motivation (the internal desire to do something just because it is an important task).


University of Michigan psychologist Karl Weick noted in his paper “Small Wins,” that large workplace programs or plans have a much higher failure rate than plans that are broken down into smaller tasks or goals. For example, take the problem of finding employment if you don’t have a job. The task can become quite overwhelming and difficult. It is easy to get discouraged and quit when facing rejection, uncertainty, and laboring under the constant financial pressures stemming from no income. Instead, if you break the task down into small steps, such as gathering info for a résumé, typing the résumé, then creating an online presence on job sites, the task becomes much more manageable and makes it easier to persevere in the face of life’s pressures to find employment.


How about you? Can you get out of debt using psychological momentum? Make one small change in your financial habits. Sustaining it could be the psychological momentum you need to create a new life of debt-free prosperity.


—Larry Faulkner



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