Getting out of debt is a big deal! Our society has normalized debt so much that it just seems like the “right” or “normal” thing to do in most situations. This might sound crazy, but I would like to challenge that idea. Debt is not the right way to pay for things—saving up and paying for things with money you already have is the right way. Why? I say why not? Why is our society telling us we can have things before we have earned them? Do you ask your boss for a raise BEFORE you do all the things expected for that raise? No, you prove yourself worthy of the raise. Why isn’t it the same way with our money? We get so caught up in instant gratification, we are like children and impulse-buy our way into a deep dark pit of trouble and stress. Maybe you are there already. Listen, this is a judgement-free zone. I know the pain of being over $100,000 in debt. I also know the freedom of being out of it—and what it took to get there.
My husband used a method called the debt snowball that worked fabulously for us. Let me explain what the debt snowball method is. You make a list of all of your debts from smallest to largest. The smallest debt for us was a $200 credit card, the largest was $89,000 in student loans. We listed everything in between. In the debt snowball, you start with the smallest debt and pay it off as quickly as possible, while paying minimum payments on all the other debts on your list. Once the smallest debt is paid off, you take what you were paying monthly on the smallest debt and add that to the minimum payment on the next smallest. You keep doing that until you reach the end—every time you pay off a debt, you move down the list and add that amount to the payment on the next one. That’s the reason it is called the debt snowball. It’s a picture reference so you can visualize a snowball rolling down a hill and collecting more snow as it goes. You are able to pay more on each debt as you move down the list because you have eliminated the one before it. People ask all the time why you would do that instead of paying off the highest interest rate first—doesn’t that make more mathematical sense? As my friend Dave Ramsey says, “If you were doing math, you wouldn’t be in debt in the first place.” Isn’t that true? Why are we paying interest to the bank on items we could have saved up for if we only had a little more patience? But really, to answer the question, it is all a psychological thing. There is so much psychology involved in personal finance, which is part of what makes me love it so much! When you pay off the small one, you feel you accomplished something great! And when you pay off the next thing, momentum really kicks in. Let’s say your debt with the highest interest rate is further down on your list and a larger amount. You are more apt to give up because it will feel like it is taking sooo long to pay off the first debt! The key here is not giving up! Keep moving forward!
So how do you get intentional about paying off debt? Here are the top 3 things I found helpful while doing my debt snowball that I highly recommend to others:
- Cut out all unnecessary expenses (temporarily). That means no going on vacation, no eating out at restaurants, no recreational activities that cost money, etc. Now is a great time to sharpen your cooking skills and invite friends over for board game nights! Some of you guys just gave up before you even started because that sounds impossible for your lifestyle. Don’t stop reading yet! At least make it through this post and then you can decide what’s possible!
- Find ways to earn extra income to put towards your debts. The more money you have coming in, the faster you get down your list. You will have some extra time on your hands without the vacations and recreational/social activities. No better way to use that time than to make more money! Sell some stuff in your house you don’t use, rent the spare bedroom in your house out, housesit and/or petsit for others, use your unique talents to help others and charge them for your services! The sky is the limit here, feel free to get creative!
- Remind yourself throughout the whole process that THIS IS TEMPORARY!!! This process is not for the faint of heart. It requires a commitment. But the only way to not give up is to see that there is an end to it all. Committing to this process does not mean that you will never go on vacation again. It may mean that you don’t leave your town for a year or 2, but that’s it! You have the whole rest of your life to spend how you want it and without all your income going out towards debt, you will be more free to do whatever it is you want to—by saving up and paying for it.
Tasting the freedom from the other side is unbelievable! It’s the main reason why I do what I do. I want to help as many others have this sense of peace in their lives as possible. It is so worth the sacrifices! You will undoubtedly grow weary and tired in the process, but don’t give up! You’ve got this! To help stay motivated and on track, subscribe to my blog for more tips on your finances.
