Most of us have debt and too much debt for our own liking but the thought of cutting it is one of those thoughts that seldom get put into action because we have to actually list the debts we have, wheras by simply battling along every month to make the monthly payments we can ignore the capital amounts and live in blissful ignorance.

This simple way to help you reduce your debt is not what you might expect, it’s a psychological approach to debt reduction that will get you started and the snowball effect of seeing your bills reduce will inspire you to continue reducing your debt until you are in a position to actually invest and take advantage of the same compound effects of interest, only this time to your benefit.

The theory is based on start small, experience the pleasure and move on to the next one. We want to feel how great it is not to have a debt, right? well then, lets get started.

Make a list of every debt you have, no matter how small it might be and list them from the smallest amount to the highest amount, take everything from your retail accounts like Edgars, Woolworths and Clicks cards right up to your car and bond accounts. You want to list the total amounts outstanding and perhaps call the provider to see if there is any early settlement benefit (unlikely but worth a try).

Step one is to pay off the smallest debt you have as quickly as you possibly can, if you can find one debt that will mean only going out for dinner once this month as opposed to four or five times, settle it, the chances are you have the money available to you right now.

What this does is stop the bills coming and the effect that this has on you is quite amazing, it gets you into the swing of getting rid of those pesky accounts. Right, we are one account down and now have a few hundred Rand spare to start at the next highest account, use the amount you were paying towards the settled account to whittle away at the next one and as soon as you see you could do the same with this one, settle it.

The difference this makes on your mental state is quite amazing and you will get the benefit both in mood and in monetary terms.