You’re in big debt. You’re not alone. To date, household debt is almost 13 Trillion. Because of this number, fortunately today, there’s so many great opportunities to get rid of it - from debt negotiation to finding a repayment plan that works for you on your own, or with a professional organization to do most of the work for you, supporting you as you dissolve it. To conquer debt, you must make sacrifices, put a plan in place, and build your determination and resolve for financial freedom. Unfortunately, many individuals go through all the heartaches of debt negotiation on their own, consolidating debt, or even getting to the point of filing bankruptcy, only to find themselves incurring new debt because they were unable to learn from their mistakes. NOT YOU!
Here’s 5 Ways Debt Will Change Your Life As You Pay It Off
Debt Payoff Teaches You to Live Below Your Means
Just a fact, you gain debt by spending more money than you make. Most consumers acquire debt over time. You buy a little extra here and there, and barely notice as the balance ticks upwards. Over the course of many months or even years, your minimum payment rises, and you find yourself pushing the credit limits on multiple credit cards. Maybe the moment of truth was when you were declined for credit or offered a much higher rate than expected. Maybe it was when you found yourself unable to cover all the bills for the month.
The process of paying down debt works the same way in reverse. Most do not have enough to pay everything off at once. You must now reduce your cost of living, stop buying, and chip away at the debt until all the balances reach zero. Debt grew over time, and it takes time to pay it off.
- Use this to your advantage and develop new habits. Success requires sacrifices. You must now spend less than you earn and take the rest for debt reduction. Use this skill to avoid new debt. When you pay off one credit card, put the extra towards the next. When you pay off the last one, put the equivalent amount of the previous payments into savings or investments to pay for important financial milestones on the horizon.
Debt Payoff Teaches You about Budgeting
The beauty of a budget is that you have more control over your finances. You decide what is important, not some advertising genius. You decide what to pay when, instead of reacting to the stack of bills on your desk. Lack of a budget creates reactionary spending based on the needs of the moment. A budget channels your income efficiently.
In order to live below your means, some form of budgeting is a must. Some operate on a loose budget that sets aside a certain amount each paycheck towards goals and leaves the rest for everyday needs. Others use a detailed spreadsheet to track every dime. Find a long-term budget process that works for you and then make it a lifetime practice, rather than an emergency procedure.
Even when you feel the weight of debt lifted off your shoulders, do not go back to unmanaged spending, because it leads to the same place you just left, Worry-ville. When you leave “Worry”, remember just what an ugly, stressful place it was, and don’t look back.
- A budget helps you organize your income into chunks of money that have a predetermined destination to ensure you can meet your financial goals. You decide financial priorities and will have the money to make those goals a reality.
Debt Payoff Helps You Develop Financial Priorities
Debt payoff requires a certain amount of blood, sweat, and tears. Yes, it does take discipline, but doing nothing only enhances the pain. You must focus on debt elimination as a top priority, or you will find new debt as fast as you make payments. This high level of sacrifice required for success is useful in all other financial goals. Imagine if you put that same level of energy into retirement savings, an emergency account, or child’s college fund. When you practice the same level of commitment, you will find the same level of success.
Mitch Albom stated, “Sacrifice is part of life. It’s supposed to be. It’s not something to regret. It’s something to aspire to.”
- To successfully pay off your debt you had to set financial goals, adjust your spending, and eliminate low-value expenses. You made eliminating your debt a priority. Replace that priority with new goals and continue to stay focused on your financial aspirations rather than the marketing messages that encourage overspending. You will see… you can do this!
Debt Payoff Strategies Reinforce the Importance of Savings
- Emergencies will happen, and it is impossible to know everything that will come your way. Establishing an emergency fund can prevent future debt by eliminating the need to put emergency expenses on your credit card. You’ve been there, done that.
Debt Payoff Teaches You to Communicate About Financial Matters
Talking about money is often a taboo subject. Parents tend to avoid the subject with children and couples struggle to talk about money issues. Yet, money continues to be a major contributor to divorce and other important family issues.
Facing debt together with your partner requires the ability to develop goals and spending plans. If you are unable to talk about money matters, financial struggles may not end with paying off debt. Coordinating income, budgets, and level of payoff can accelerate debt elimination and lead to stronger communication long-term. Two people working together can create better strategies, increase income and find faster results. When you feel like you are a team, you will have the support needed to keep your priorities in focus.
- Find an accountability partner. Someone that makes you feel safe and discuss financial matters openly and honestly with them. You will discover new perspectives and develop healthier habits that support your goal of financial freedom. A beautiful life is living authentically without living beyond your means with time to spend with those you love. Not buying more stuff. Every time you pay off debt, just smile and think, “We’re worth it!”.
Ryan Sasson is the CEO of Strategic Financial Solutions. He co-founded the company in 2007. A native New Yorker, Ryan has almost two decades of experience starting and growing businesses in the region. Before founding Strategic, Ryan was the president and founder of Timberline Capital, one of the largest Merchant Cash Advance companies in the country. Ryan is a member of YPO Metro and in involved with multiple charitable organizations. Ryan holds a Bachelor of Science in Business Marketing and Business Management from Tulane University and is currently enrolled in the Presidents Program at Harvard Business School. Connect with Ryan via LinkedIn!