Melanie blogs about breaking up with debt at DearDebt.com and invites others to write breakup letters to their debt as well. She’s accumulated a total of $81k in student loan debt between two degrees. Currently she puts more than 50% of her income towards debt, while living a frugal, fun life. Melanie enjoys travel, art, music, adventure, and of course, personal finance.
Paying off debt isn’t very fun.
Oftentimes, it can feel like you are putting your dreams on hold, throwing all your money at interest, and can feel like you have less control of your choices because of it.
For some people, a relationship with debt might be longer than any of the romantic relationships they’ve had. This has been the case for me! I have been paying off debt for seven years (I accrued a lot more by going to graduate school), and I’m starting to get the seven-year itch.
I want out. I want a break, a breath of fresh air.
But I’m in this for the long haul, and now that I’ve made a commitment to ridding myself of student loans, I need to stay focused, even in moments of frustration.
Whenever I think I want to throw in the towel, and pretend I don’t care about my debt anymore, I think of these things:
1. Think of Every Purchase as Hours Worked
Fancy mocha = 15 minutes of work. Lunch = 30 minutes of work. Vacation = 4 days of work. Once you start thinking of things as minutes, hours, or days worked it is easier to say ‘no’ to things. It also gives you a great perspective. Is this really worth it? Take this exercise a step further; don’t just calculate based on your hourly wage, but your after tax wage. That’s when you get some really shocking perspective. Once you realize how much time you spend working, and what exactly you are taking home after taxes, you can see your relationship with work and the things you spend on.
2. Know Your Daily Interest Rate
At the height of my debt, I was paying $11 per day in interest. Ouch. I am now paying roughly $6 per day, and that’s still a lot. Knowing that I already have a large chunk of money going to interest per month, really helps me stay in line with my spending. I’m also really motivated to lower that number to something a little more manageable!
3. Think of It as a Game
Start thinking of paying off debt as a game. Come up with simple rewards for yourself after you reach certain goals. For example, after you pay off a certain amount, treat yourself to something nice; a bottle of wine, an evening of music, a day in nature, etc. I don’t think debt repayment should be all about depriving yourself. That’s no fun and can easily backfire by turning into debt burnout!
You can also consider saving money in some areas, and put that same amount of cash in a jar. For example, if you go out for coffee 3 times a week, and scale back to once or twice a week, by the end of the month you’ll have an extra $10-$20 to put towards debt. It might not seem like a lot, but it can add up!
Another little trick is rounding your paychecks down. If you get a paycheck of $1,280.86 round down and put .86 towards debt. Loose change can add up. Put all extra side hustle income toward debt. Test yourself and see how little you can survive on. Think of it as Debt Survivor!
4. Dream Big and Plan for the Future
Maybe you have figured out the how of paying off debt, but it means nothing without the why. You need to know why paying off debt is important to you. For me, it’s the flexibility of traveling, financial security, and worrying less. I have quotes, postcards, and pictures all over my apartment to remind me of the why. Some days debt freedom feels so far away, but I have to remind myself I will get there. Debt isn’t designed to be easy; it’s a life test and you have to prove you can overcome it to get to the end of the rainbow.
5. Current Debt Payment = Future Savings Plan
How much money are you putting toward debt each month? I am putting over a thousand dollars per month toward debt, which is more than my rent. It’s awful, but one day all that money is going to be mine! I intend to catch up with retirement, invest, and fully fund my travels. The sooner I get out of debt, the sooner I can fund my other dreams, in a big way. Debt repayment can teach you patience and how to be focused, so using that same philosophy will help you with your savings goals.
What tips and tricks do you use to pay off debt?