As you’re paying off debt, you may wonder if you’re being successful, especially if you’re making small payments or even minimum payments. You can eliminate some of the curiosity and guesswork in your debt repayment by creating milestones in your plan. Milestones are mini-goals or checkpoints that you’ll reach on the way to your larger goal of debt freedom. Setting up milestones can help you measure your progress toward paying off your debt. Having and reaching milestones helps keep you motivated to pay off your debt. You’ll know you’re making progress as you pass milestones.
Record Your Starting Point
At the start of your debt repayment journey, record the total amount of debt you have. This gives you some perspective on how much debt you have to tackle and will help you create your milestones. It also helps to write down the date you’re starting so when you’re completely debt free, you’ll know exactly how long it took to accomplish your debt payoff.
If you’ve already started paying off your debt and you don’t remember how much debt you started out with, you can start tracking your debt from this date forward or you can estimate the amount of debt you started out with.
Create Your Milestones
One of the benefits of setting milestones is that you have something to feel good about, something that lets you know you’re actually reducing your debt. If your milestones are too far apart, you may get discouraged about paying off your debt. For example, if you have a large amount of debt, you should set smaller milestones. On the other hand, if your milestones are too close together, they become meaningless. There’s a delicate balance.
There are a few ways you can track your debt progress. For one, you can measure by dates, e.g. every quarter, every since months, or every year. At each milestone, calculate how much debt you’ve paid off. For example, you can celebrate the fact that you’ve paid $6,000 toward your debt in six months.
Another way to set your milestones by the percentage of debt you've paid, e.g. 10%, 25%, etc. It can help to write down the amount of debt for each percentage when you get started, so you’ll recognize when you reach them. For example, if you have $10,000 of debt, you’ll have paid 25% when your debt gets down to $7,500; 50% at $5,000; and 75% at $2,500. Here's a debt milestone worksheet you can use with milestones set at 10% (Black and White version).
If you’re paying off several different debts, you can have milestones for each of your debts. Or a milestone for paying off each of those individual debts – this works great if you’re snowballing your debt.
Reward Yourself
As you reach each milestone, give yourself a small reward, something you enjoy, like a book or CD. When you finally pay off your debt, you may give yourself a bigger reward, but nothing expensive that will put you back into debt.
