Tackle Your Debt
As counter-intuitive as it seems, a certain amount of debt can actually be a good thing, when it’s used strategically. Shopping around for the best mortgage rate, for example, is absolutely a good use of your time. However, if you’re a credit card holder whose household carries the average amount of credit card debt ($8,398!), that’s a different story. That debt can cost you a lot of money over time, it can damage your financial well-being in other ways, and aside from all of its other disadvantages, it can damage your emotional well-being, too.
Let’s not underestimate the importance of your emotional well-being here. Debt can be frustrating, exhausting, or overwhelming. And you don’t deserve that! You deserve security, peace of mind, and abundance. You’re worth it.
So here’s the plan: You’re going to make a monthly budget that involves spending less than you earn, and you’re going to track your spending to stick to it. You’re going to get to work on an emergency fund. And you’re going to tackle that debt. Ready?
First, the reckoning. Make a list of every debt you have. Include the amount you owe and the annual interest rate you’re paying. Include everything: credit cards, student loans, car loans, even the $50 you owe your sister. Write it down.
Now before you go any further, take some time to sit with this list. Get out your journal, if you’re a journaler, or just ask yourself some questions:
Do you have an emotional reaction to anything on this list? What is it?
This might sound odd, but is there anything on this list that you’re grateful for? Before you spend the next year (or however long) pretending this debt is your enemy and battling it down, take a moment to acknowledge that it might have given you something good or something you needed at the time.
Can you learn anything from anything on this list? What is it?
How much are you paying per month, on average, to maintain this debt? Add up your average interest payments and service charges and circle that number. (Multiply it by 12 to see what it looks like over a year.) Imagine, when this is over, having that much extra money in your monthly budget. What will you do with it?
Now look at the list as a whole. Your next task is to reorder the list by the order in which you want to pay off your debts. Assume you’ll be paying the minimum amount on each of them; presumably, that’s already part of your monthly budget. (If it’s not, go revise your budget!) Your job is to then dedicate every extra dollar toward paying off the debt on the top of the list, then move to the next one. Really focus on one at a time.
Some people like to pay off debts from highest interest rate to lowest. Some people like to pay smallest amount to highest. (You deserve the early win!) You might have other reasons to work something in: Maybe that home improvement store card only gave you a 0% interest rate if you pay off the dishwasher within 12 months. Put it on top. Maybe you’re just tired of owing your sister $50. It’s okay to prioritize her.
Don’t skip the following step: You need to reward yourself every time you hit a milestone. Choose your first prize now, at the outset, so you have something to look forward to, be specific, really visualize it, and write it down. And when you get there, deliver. If you get there within a slightly aggressive timeframe, upgrade your reward. For example, you could tape this to your bedroom mirror:
When I pay off my home improvement store credit card, my husband and I will go out to my favorite Mexican restaurant. We will toast our new fully owned dishwasher with margaritas and the best guacamole in town. If I pay it off before October 1, we will bring home breakfast for the next day from the bakery next door to the restaurant.
Again: This won’t work if you don’t deliver. So deliver!
In the meantime, reward yourself for the little milestones too. It may be uncomfortable at first (ask yourself why), but get in the habit early so you can avoid getting overwhelmed. Every time you write a check, whisper “I deserve abundance” or “I deserve to be debt-free” into the envelope before you seal it. Or tell yourself “I’m proud of you” in the mirror. You should be proud of yourself, and you do deserve to be debt-free.
Go get it!