I get asked all the time – “What is the “right” way to pay off debt?”.
There is no right or wrong way as long as you do it!
Sure, some methods may make it easier or faster but that only matters if you follow through and actually pay off your debt, right?
So, when I hear You-tubers, financial advisors, or bank employees tell people that you should always pay off debt with a high interest rate first, I cringe.
The problem with this way of thinking is that it ONLY focuses on the math and not the person.
If math was important in our decision making process, we wouldn’t be in debt in the first place!
We are humans, not robots.
We make decisions based on our thoughts, feelings, emotions, life experience, and perception of our reality. – NOT on logic alone.
Plus let’s be real, using the words “should always” for most things in life, just isn’t true. There will always be exceptions.
Now, while I do not believe that there is a wrong or right way to pay off debt, there are plenty of ways that can help YOU get there faster and easier based on your real life.
So, today, I’m going to cover some things that I did while paying off debt that I would have done differently NOW with the privilege of hindsight and more knowledge.
For more tips on paying off debt fast, check out these blog posts:
10 Easy Tips for Paying Off Debt FAST!
Why the Debt Snowball is the Most Effective Debt Pay Off Method
The Best Debt Snowball Calculators
Don’t Make These Mistakes –
Not Saving First –
It can be exciting once you decide you want to pay off debt but don’t overlook the value of saving a small emergency fund first!
Saving BEFORE you start paying off debt will help keep a buffer between you and chaos.
When you have some money saved, you can deal with things when they pop-up – because they will – without adding to the debt.
When you have money set aside and don’t have to swipe a credit card, it builds your confidence, helps you make better decisions, and keeps you motivated to keep going.
If things come up and you have to add to the debt, it can feel defeating and like you aren’t making any progress.
Keep Swiping the Credit Card –
If you want to pay off debt, you have to stop using debt!
By continuing to swipe the card, you are not making any progress.
You are continuing to dig a hole WHILE you are trying to fill it.
Now that just doesn’t make any sense!
It can also make you lose motivation extremely fast because you aren’t seeing any results from your hard work.
If you are working hard at sending money to pay off the credit card and yet the balance doesn’t seem to move, you will quit.
Staying motivated and building that momentum is the key to consistency and progress!
Not Tracking Where Your Money Is Going
When you want to reach a goal like paying off debt, you have to be intentional about the actions you take.
That means you need to know be intentional with your spending, sending money to the debt, and not spending on things that aren’t as important to you at this time.
Tracking your expenses is crucial to staying on track with your spending and making sure you send extra money towards your debt.
Logging your spending helps you changing your habits and be more accountable to yourself and your goals.
Not Having a Realistic and Specific Goal/Vision
Wanting to pay off debt just because you know you show isn’t going to be enough motivation to sustain you through the months or even years that it’s going to take.
You need to know what you are working towards and how quickly you want to get it done.
This means you also need to be realistic with yourself and your plan.
It is very helpful to know how quickly you can pay it off and how much you are wanting to pay off.
For example – your goal would look something like – pay off $15,000 in 15 months.
That goal is specific, it’s realistic, attainable, and timely.
Now, that may not be ALL your debt but if you have $100k+ in debt and only make $50k a year, that is going to be so overwhelming that you’ll likely quit before you even get started.
So, I recommend setting micro goals to help keep you going and help you feel like you’ve accomplished something.
Micro goals are incredibly helpful when setting any big goal.
The micro goal could be something like – pay off $500 in medical bills in 1 month.
That feels more doable and you can focus on small steps instead of the big picture.
Sending Extra Money to More Than 1 Debt at a Time
When you have several debts you want to pay off, it’s very tempting to send a little money to several of them at the same time.
But in my experience, it doesn’t give you enough of an emotional boost to feel like you are making any progress.
Sure, the math might be the same in the end, but it won’t matter if you quit 6 months in because you don’t feel like you are accomplishing anything.
When you focus on just ONE debt at a time, you can see your progress happening much faster.
Which is going to help you keep going!
Remember, the most important thing about paying off debt is that you don’t quit!
Think about it this way –
If you have $200 a month to send to debt –
In 6 months that’s $1200 of debt paid off.
If you sent $1200 to a card with a balance of $800 and a medical bill with $400, you’ve paid off 2 debts.
That feels amazing doesn’t it?!
BUT….
If you sent $1200 to 6 different debts, that’s only $300 to each.
Which means you didn’t pay anything off in 6 months.
That just doesn’t feel the same does it?
Expecting Perfection
Consistency is not getting it 100%, 100% of the time.
It means getting it mostly right, most of the time.
Your journey is never going to be a straight line to success.
There will be ups and downs, twists and turns, mistakes, and setback because you are human and this is real life.
Things will come up that you didn’t plan.
Kids will get sick, vehicles will break down, life will happen.
If you expect perfection, you will be incredibly disappointed.
Then even when you have wins, you won’t think it’s enough because it wasn’t perfect.
Meeting 80% of your goals is a win.
It’s better than zero.
But if you are expecting 100% then 80% will feel like a failure.
Ignoring Habits & Routines
We are creatures of habit and your habits and routines can either set you up for success or set you up for failure.
By setting yourself up for success, you will be able to maintain these new money habits in the long-term, long after you pay off your debt.
Because your money journey does not stop when you are debt-free.
You have to change how you handle money, thing about money, and your relationship with money if you want long-term success.
That starts with making things as automatic as possible.
Think about all the things you do as part of your daily routine that you don’t even think about but if you forget to do something, you feel lost.
You can build those same habits and routines with your money.
It will become second nature and automatic which will set you up for long-term success.
Paying Off Debt TOO Fast
When I was paying off debt, I was ALL In.
I wanted to do it as fast as absolutely possible.
I said no to things that I wish looking back that I would have said yes to.
The way I did it was not sustainable.
It’s kind of like going on a super strict diet, reaching your goal, and then binge eating and gaining weight back.
Doing it so fast did not help me in the long run.
I could have taken 2-3 months longer and not sacrificed so much in the process.
Those couple of months wouldn’t have made much difference on the overall plan.
I still would have been debt free and I could have made some memories that I can never make up for.
It also would have been easier to save once we reached our goal.
Once we were debt-free, it took us forever to save because we had to make up for all the things we didn’t buy through the process because we put it off.
We had several big expenses that set us back and I lost almost all momentum afterwards.
It would have been better to take things slow and steady and kept the moment had I focused on long-term success instead of short-term reward.
Refusing to Compromise
Along the same lines of keeping things realistic and keeping in mind long-term success, you want to have your family on board with the plan.
That may mean that you need to compromise on your bigger goal, the timeline, and how you get there.
It can’t be all about what you want and how you think you should get there….unless you are doing it alone.
If you are doing it with a partner, their input matters.
They will have different perspectives, experiences, and beliefs about money than you.
That doesn’t make either one right or wrong.
It just means that you need to work together to reach a common goal and to set your partnership up for long-term success.
For me this looked like making sure that my husband had money for lunch.
I wanted to cut everything when paying off debt.
But it wasn’t realistic or good for my husband’s mental health to not be able to go out to lunch and socialize.
It was a compromise to set aside $80 a month for lunch.
Sure that could have went to debt, but it was important to him.
If I didn’t set that money aside, then when he would go to lunch, it would mess up the budget.
It would also set the budget up for failure if I didn’t consider that expense.
Thinking You Don’t Need Accountability or Support
One of the main things I remember from my journey was my friends and family not getting why I was so focused on paying off debt.
I didn’t have a support system.
It was really hard being surrounded by people that just didn’t get it.
That’s why I have created the Money Success Club.
Having a community of other women going through the same things as you is very encouraging and helps keep you motivated.
If you are feeling alone and like you are the only one that has made money mistakes, find a group that makes you feel like you aren’t alone!
Summary
Paying off debt is a journey toward long-term financial success.
It’s important to focus on the small steps that lead you in the right direction.
Long-term success will come from the habits and routines that you create while making small changes.
Remember – there is no right or wrong way to do it as long as you do it!
You got this!
