Set Goals You Can Reach The second stage in getting out of debt
By Jean Chatzky Additional Reporting by Carolyn Bigda

(MONEY Magazine) – Over the past three years, Debi and Richard Shaw have racked up some $10,000 in credit-card debt. The part-time bank teller and her 55-year-old husband, who drives for UPS in Simi Valley, Calif., earn a nice living--some $80,000 a year--and they can't put their finger on one single item that set them back. "We don't really have anything to show for it," says Debi, who will turn 50 on her next birthday and has started to feel the pressure of retirement looming. She wants to get out of debt so that she and her husband can start socking away enough to retire comfortably. The question is, how? How do you pay back $10,000?

The answer is, you don't--not if you want to succeed, explains Jim Ball, co-founder of the Goals Institute, a consulting and training firm in the Washington, D.C. area. "Your brain is a microprocessor that needs very small, step-by-step instructions in order to do what it needs to do," he says. "If it doesn't have the breakdown, it just can't work."

Step 1: Break down the process

Let's say you're trying to lose a little weight before your high school reunion two months from now. How would you approach that problem? You'd climb on the scale and see that it was teetering around 153 pounds. You've always weighed between 140 and 142. So you'd have a goal: to lose weight. It would be specific: 10 pounds. You'd have a time frame: two months. And you'd do the mental math: About a pound a week will get you there.

Because you figured that out, you'd have a much better chance of success than if you were dieting aimlessly. The same is true if your goal is reducing debt or finding the best route to work from a new home. As Ball says, "It's the same brain."

Step 2: Retrain your brain

Once you've got your breakdown, you need to get your brain to accept the fact that you're going to live on a little less. How? "You move [that principle] into your long-term memory by thinking about it, then talking about it, then doing it. All of a sudden, it's a habit," says Ball.

Debi and Richard did it exactly right. They decided to pay $600 a month on their credit-card debt. They came to that number thoughtfully. Debi used to spend $230 a week on groceries; now her target is to spend less than $200. That's a $120-a-month savings right there. Cutting Friday-night dining out saved another $200 a month. With these and other small economies, they met their first $600 target. They figured if they could do it once, they can do it again.

And if they can do it again (and again and again), those $600 payments, combined with the $2,300 tax refund they're expecting, will put them in the clear in a year. So far they've knocked their debt down to $8,500, and they're feeling great. They've stashed their credit card in a bag of water in the freezer. And they're increasing their chances of success by talking about what they're doing--to each other, to their friends and family, even to MONEY.