Interest payments have gone up for most borrowers.
The COVID related significant 3-year pause on payment of federal student loans will end on September 1st. It is important that people with federal student debt have a strategy to prepare for this change. In addition, mortgage rates are up to almost 7%, so anyone who is planning to buy a house will need to expect higher costs or a larger downpayment. Rates on car loans are also up. More problematic still, is credit card debt. The average interest rate on credit card debt at present is above 20%, so it is extremely important to have an effective strategy to pay it off. Even the government is paying higher interest on debt, and that impacts us all because our taxes support the expense. At UOU, we want to help people make their money work for them and we believe the first step is to pay down debt, especially now that it is so expensive.
Paying down debt and shifting into saving is difficult, so we suggest trying WOOP.
You may have set a SMART goal, as we have recommended in past issues of News You Can Use, but if you find yourself stumbling, try WOOP. WOOP is an acronym for Wish, Outcome, Obstacle, Plan. It is a method developed by Dr. Gabriele Oettingen, which studies have shown, helps people overcome obstacles to achieve their goals. We love it! It is simple, it only takes 10 minutes at a time, and it is effective. The more you practice WOOP, the easier it becomes.
Below are the steps to implement WOOP
Before you start, relax and remove distractions. Get ready to really visualize your future self.
Wish: State a wish and visualize it. This could also be a step within your SMART goal or the goal itself. It should be specific and time-bound. For example, “I will save 5 percent more this week than I did last week”. You can do this for time increments of a day or a week or longer.
Outcome: Think about the outcome of achieving your wish / goal. Revel in how it will feel when you have attained your goal. Take time to imagine what that success will look like and how it will make you feel. For example, think about how it will feel to see extra money in your savings account, having lower credit card payments, or how it will feel to have your student debt paid off. You might think about the feeling of having less stress and more financial freedom.
Obstacle: Next think about any obstacles that might get in the way of reaching your goal. For example, you love to go out for dinner and have lots of friends with whom you often go out. It might be an obstacle when your friend suggests that you go out together to an expensive restaurant this weekend. Or perhaps you have children who want the latest fad clothes, and you know they will ask you to spend money on these things.
Plan: Finally, decide now on a concrete plan for how you will overcome these obstacles. Then write down the plan. Visualizing how to deal with obstacles is a crucial step to achieving success. For example, if your obstacle is dining out with friends, you could plan to suggest to your friends that you make a new recipe at home instead of going out. If you have children who want many things, you could explain the basics of savings even to young children and then suggest a less expensive, yet fun alternative. You can explain that when you don’t spend today, you will have more to spend next time you need something because receiving interest makes money grow, just as paying interest makes money shrink.
Applying the WOOP technique to all your goals can make you more successful. For more information check out the following website: https://woopmylife.org/, which has videos describing the method and the research behind it as well as book suggestions for further reading.
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