I used to be extreme about paying off debt. You could even call it obsessed. Read about my first few months paying off debt (and laugh at me) here. I did not think you could pay off debt and still have a life.
My debt popped into my brain almost every minute of the day when I first graduated. I would not allow myself to buy anything (even replacement socks when mine got holes) without feeling extreme guilt. It was effective for paying off debt quickly, but it consumed me in an unhealthy way. I knew it was not sustainable.
There was no way I could have a life, mental health, or friends if I continued on my obsessive path.
Don’t get me wrong- I still think about my debt and finances often. It dawned on me though that finding balance in my life was just as important as the negative number that used to keep me up at night. My money mantra became:
Balanced finances for a good today and a great tomorrow.
There are two debt rules that should not be ignored:
- I strongly believe that if you use a credit card, you should pay the balance off in full each month. [Side note: Did you know that if you pay off the majority of your credit card balance but leave a little bit remaining, you will still pay interest on the entire balance? It is so important to pay it off each month to save yourself interest costs. “Paying interest makes me happy” said no one EVER]
- You always need to make at least the minimum payment on each debt monthly. If you are short your credit score will take a hit, so be careful not to have late payments.
Besides those two rules, I think paying down your debt is “choose your own adventure”. If you have really high interest rates, you may want to consider knocking that debt down quickly so you pay less overall. If you have student loans with a reasonable (and often tax deductible!) interest rate, you can be more flexible in your timeline. It really comes down to your personal preference, attitude, and financial ability.
Some people like to work three jobs, eat rice and beans, and buy absolutely nothing until they pay off their debt. If that sounds like you, read this book.
Other people take a more balanced approach, but the trade off is that it obviously takes longer to get out of debt.
Only you can decide which method works best for you. Personally, I now take the balanced approach and feel good about it.
I figured out my remaining debts, and used an online calculator to play around with the numbers until I decided on something stomach-able and actually achievable. My favorite (and free!!) online calculator can be found here:
It allows you to input numerous debts, interest rates, and minimum payments. Since those are all set unchangeable values, enter them first. Then you can play around with the monthly total value you want to put on debt, and it will tell you the exact month you will be debt free!
I think committing to a plan is the most important part because it allows you to visualize the day you will be debt free.
Actually take a second to imagine that:
One day you will be totally debt-free.
Personally, I committed to putting $1150 a month on debt which will have me debt free (including interest) in 5 years. To learn how much debt I have and how I got it, read this.
[For tips on how to come up with extra money to pay off debt, read this]
If I have money left over at the end of the month, I can spend it on fun totally guilt-free. Occasionally I will do what I call a “debt burst” where I try to minimize my spending as much as possible that month, and put all excess on debt. I have promised myself that is not a requirement though, so I do them only 1-2x a year.
If I put $1150 on debt, I feel proud. I met my goal. Your monthly goal (and overall debt) may be much higher or lower than mine. That is not the point. As humans, we have a tendency to move the finish line as soon as we achieve something. Slow down and allow yourself to celebrate successes. Compare your progress to where you were a year ago. Allow yourself to really feel proud. You are bettering your future, and you will get there.
There are lots of reasons people get into debt, but having debt does not define you as a person. You can learn how to pay off debt and still have a life. You deserve happiness today.
For a list of all posts I’ve written, click here