HAPPY FRIDAY, Y’ALL!
I’ll write more about it next week, but this week I made a few financial decisions that have re-kindled my love for talking about debt repayment.
I’m starting to kind of give everyone in my life unwarranted advice, because it was Ernie’s unwarranted advice that eventually pushed me over the edge to start thinking about money differently. Recently he sent me this text:
Changing your thinking.
The catalyst for my whole debt repayment journey was realizing that money was meant to be utilized, not spent. Money is a TOOL, not a TREASURE.Money is a tool, not a treasure. Click To Tweet
and I want everyone in the world to get it. I’m not anywhere near perfect in this matter, so I’m not saying “do what I do,” I’m just wanting everyone to shift how we think about money so that we can really truly live free of the ball + chain of money problems.
This post isn’t for someone who writes posts like “How I paid off $34K of debt in two months.” This post is for the everyday average human being with an average amount of debt and the ability to make on time payments and even every so often make additional or extra payments, but we’re used to the debt.
ONE // Money is for utilizing, not spending.
I pay my dentist a LOT of money. It’s just what we do. When I first met her, I maxed out my insurance within two months. Then I took out a $2500 credit at 20% interest because I hadn’t been to the dentist in a very long time and we had some business to take care of. I remember looking at the piece of paper that said (basically) YOU ONLY OWE $75 A MONTH… FOR FREAKING EVER! and I got upset about not having the money to pay it off.
but I did have the money. I was EASILY dropping $75/month at thrift stores buying clothes or books or CDs. I was just wanting to spend my money on things I wanted instead of using money as a way to get what I NEEDED. Once I decided “I don’t really NEED anything except for the occasional new bag of cotton balls or hand soap for my bathroom,” I saw the $250 left over after payments as money to utilize, not money to spend. The money left over after you’ve paid the minimum payment on your debt isn’t what you should take to the mall and go crazy, it’s money you should strategically put back into paying off your debt more quickly.
TWO // Pay one thing off quickly.
The Dave Ramsey method talks about the snowball method; paying off the lowest balance first to get the momentum to keep going. I like the idea of it, but I say just pick one thing and go all out. I chose to throw my money at my Dental First credit because I’m paying off past dentist visits which annoys the crap out of me AND the interest rate was 20% which also annoys the crap out of me AND since it’s not an account where the balance fluctuates (except for the stupid interest charges), I just want to get rid of it. It serves me no real purpose. I actually hate it so much. I just want to be freed of it. So that’s my one thing I’m paying off quickly. Sometimes I look at my bank account and go “I have $175 in my account and I get paid tomorrow… I don’t need that much money in my account.” and then I make a $50 payment towards my dental first debt. Because I HATE THAT THING AND WANT TO GET RID OF IT SO BAD! Pick one debt that you hate and want out of your life and then just WAGE WAR on that thing.
THREE // Only spend what you have.
First, let me say that before I start feeling all guilty about this… I put my $5 mocha on my credit card because I left my debit card at home. But luckily this credit card is connected to my bank account so I just paid it right away. Life happens. But I had the money for the $5 mocha. You know what I didn’t have the money for? The $800 camera I bought at the beginning of the year. Still paying off that one, but with 16% interest. Save up your money, and when you have enough.. buy it. Obviously things happen like your dentist costs you a lot of money or whatever, but putting money on credit should grieve your soul. Ernie bought two microphones and had to put it on his credit card briefly and he went straight to work paying it off as fast as possible because he doesn’t want to carry a credit card balance for any longer than he needs to.
FOUR // Figure out what motivates you.
When I do my debt repayment recaps, I focus less on the dollar amount I put towards my debt and instead focus on the percentages. For me this works because even paying the exact same amount of money each month will slowly increase the percentage I’m paying off. An example.
The $400 car payment decreases my $20,000 car loan by 2%. Four months later when I pay $400 on an $18,400 loan, that is 2.17% of my payment. As the debt decreases, my normal payment puts a bigger dent in what’s left. As I free up more of my money by adhering to #2 up there, I’m able to do more than just the normal payment, because I can take what I was paying on other things and keep utilizing it even when it’s freed up from a certain payment. That motivates me, and it even weirdly gets me excited to speed up the process. Next week I’ll give you a very clear example of this.
FIVE // Don’t completely deny yourself.
Wow, it kind of sounds like I’m writing about a diet plan or something, doesn’t it?
The point is; this is all about shifting your mindset. If you become masochistic about it, you’ll end up binging. It’s like “eat the cookie if you want it, just don’t eat the whole cake.”
For example… Kristen got me a really super cute Kate Spade pencil pouch for Christmas. and I have NEVER done this, but I left it on an airplane. I filed a lost item report with Southwest and everything. Obviously it’s the cutest thing ever but so much of why I was sad was because it always made me think of Kristen. So when I was at Papyrus and saw it, I picked it up and hugged it and said “you are mine.” I didn’t think twice about the money I was spending, because I knew at that moment that replacing it transcended the financial cost of it. If I’d stood there debating or justifying it or anything, I think I would have been so frustrated. But because I don’t walk around dropping money on anything I think looks cute, I didn’t have to worry too much.
Eat the cookie. Don’t eat the whole cake.