Hello readers! As the blog grows and expands I’ve decided to bring on a staff writer and begin building a team over here at Staying Frugal. John over at Married (with debt) has agreed to join my team! Yay. So here is his first article for this site. I hope you enjoy it.
In reading the many personal finance related blogs on my daily list, I’ve been seeing lately a lot of people losing control of their debt payoff plans. This can be due to a variety of reasons, but most likely it is due to one of these three:
- The process is taking too long
- Lifestyle creep
- Not having success
How Long is this Gonna Take?
For some, their debt payoff may only take a few months of sacrifice and focus. But for others, they could be looking at YEARS of struggle. Take me and my wife for example. In the last 10+ years, we’ve paid off around $90,000 in consumer and student loan debt. This included credit cards, student loans and a few new vehicles.
To put things in perspective, it was in 2008 that we finally paid off about $20,000 in credit card debt. In the years since then we also paid off two vehicles totaling more than $45,000, and one student loan that started at $25,000.
To be clear, we have been working towards debt freedom for about 8 years, but it was without focus. We took some steps forward and steps backward, but have made steady forward progress since the 2008 financial crisis sobered me up.
Another reason people lose control of their debt payoff plan is lifestyle creep.
Lifestyle creep is basically complacency. You pay off a few debts and feel you need a reward or some breathing room.
Maybe you buy a new car. That’s what we did when we paid off our credit cards. Very shortly after buying that Ford Escape I realized we made a mistake.
Humans are human and naturally crave rewards. This craving can overpower common sense. To stay focused we need to be wary of lifestyle creep and take active steps to combat it.
For example, last year I received a pay raise. Instead of treating it as new money, I treated it as if it never happened and lived on the old paycheck. The new money was dedicated to debt
Please note that lifestyle creep can only happen in one direction: up. If you experience a loss in income, this is lifestyle crash.
Not Having Success
Many people lose focus on their debt payoff plan because they don’t feel any success.
Success in debt payoff can be defined in many ways, but if you are facing a mountain of debt (think six figures), success can feel like a distant dream.
That’s why I recommend you pay debts off by amount, smallest to largest. This frontloads a lot of your success and gives you forward momentum. It also reduces the number of creditors you owe and the chance that you’ll miss a payment and get a late fee.
Get Back on Track
If you are exasperated and wondering HOW I’m going to pay off this debt, maybe you are asking the wrong question.
Try thinking about WHY you are going to get out of debt. Refocus on why you are making these sacrifices and what you hope to accomplish.
The how will fall into place once the why is firmly rooted in your actions.
It is important to get back on track as quickly as possible, or you could risk losing interest and all your progress thus far. Personal finance is never absolute, and it’s okay to make mistakes or stumble when an unplanned expense knocks you off track.