Would You Go This Far To Pay Off Your Debt?

July 03, 2017

Do you feel like the stress from your credit card debt and student loans is out of control? Perhaps you’re wishing on stars for a lottery win or an unexpected inheritance which will wipe your financial slate clean? Maybe you’re putting off going to the dentist or taking a vacation so you can pay your credit card minimums? If you’re sick and tired of living this way, ask yourself this question, “Am I ready to do whatever it takes to pay off my debt?”

You are not alone

Our research shows that nearly one in four employees (23 percent) reports unmanageable financial stress. No age, gender, income level or demographic group is immune from financial mistakes. However, the reverse is also true: millions of people of all ages, genders, income levels and demographic groups have successfully tackled their debts and gone on to build very comfortable financial lives.

I know, because I’m one of them. In my early thirties, I was a renter with credit card debt, student loans, a damaged credit score and a lifestyle beyond my means.

Twenty years later, I’m a financially independent homeowner, real estate investor and committed saver who puts away 30 percent of my income. My journey to find financial balance inspired an entirely different career as a financial planner and led me to meet my husband.  It all started with my personal declaration of financial independence, and my vow to make whatever changes were necessary to dig myself out of the hole I was in.

Big changes get big results

How did I do it? Initially I tracked my expenses and made small changes that saved $5-10 per day: I made coffee at home, gave up magazines, canceled the gym membership, etc. My fellow planner Kelley Long had similar experiences of cutting small luxuries when she was tackling debt. Although I was proud of myself for making changes, after a few months I grew frustrated. I didn’t feel like I was making progress quickly enough. That’s when I decided that only making drastic changes would get the outsized results I was seeking. Here’s what I did:

I downsized my living space. I had a beautiful, spacious rooftop apartment with a deck, a view of downtown and a short walk to the lake. I gave my notice and moved into the home of some friends for three months while they traveled overseas, then rented a room in a 2-bedroom house for a few years. I saved about $600 per month in housing costs, even if my dignity suffered a little initially, and ended up with a fun housemate. After a few years, I moved back into my own place, but instead of choosing a spacious downtown apartment I chose a small studio. If you’re looking for some wiggle room in your budget to pay down debt, looking at living expenses may make sense. Is it time for you to downsize your housing?

I took walks, hikes and hosted potlucks. As a single woman in an urban area, I had grown accustomed to a social life built around discovering new restaurants, movies and meeting for wine or coffee. That was a lot harder to change than my living space. What would I do for fun? I set parameters for how much I would spend on entertainment per week (about $50, for a savings of about $300 per month) and began to find new ways to connect to my friends. I was proactive, suggesting meeting for a walk instead of Thai food. When friends invited me to dinner or to an event, I politely declined if I’d met my entertainment budget for the week. Parties became potluck dinners, which friends liked because they saved everyone money. There is a secret financial power in home cooking!

I gave up my car. A few years into my financial transformation I was making excellent progress. I had moved back into my own place, up in the hills where there was no close public transportation. Then a twist of parking fate compelled me to give up my car – and not replace it. I walked almost everywhere (a relatively easy thing to do in a big city) and took buses and the train. I will admit: there were occasional moments of embarrassment, such as when I sprained my ankle and friends at work had to drive me around for a few weeks. I chose to explain my decision by saying I wanted to walk more for fitness. This saved me about $300 per month compared to what I had been spending. I’m not the only planner who’s done this, by the way. My financially savvy colleague Erik Carter went carless last year.

How much did I save all together from these big changes? More than $1,200 per month, between reduced housing costs, giving up my car and capping my entertainment expenses. That’s four times as much as I had been saving by cutting small luxuries. Thanks to my willingness to reconsider the necessity of the most expensive items in my spending, I was able to pay off my debts much quicker and save thousands in interest charges.

Tackling debt can feel like climbing a mountain, it is true. But adventurous souls climb mountains every day. Consider making some big changes to climb that debt mountain faster. Trust me, you’ll feel great when you get to the top and look around at how far you’ve come.

Do you have a question you’d like answered on the blog? Please email me or you can also follow me on Twitter @cynthiameyer_FF.

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