Strategies I Use

I’m not one for giving tips, but I have developed a method for getting out of debt, most of it exceedingly obvious and borrowed from other people.  Some of it designed to combat the mind tricks I use to sabotage myself.  A lot of it unconscious.

1. The Snow Ball Method. This is taken right from Dave Ramsey, of course.  What can I say, but that it works.  I wrote out all of my debts, and started knocking them off, smallest to biggest.  Paying off the small stuff first leads to early victories (I had my first a little over a month into this journey) and encourages you to keep going. And then when you get to the big debts, you can put a lot of money toward them, because you’re not also making minimum payments on other debts.  It’s not the most strategic in terms of the bottom line, because you’re not concerned with what has the highest interest rate, but it is ultimately the smartest thing, because it’s not about getting the best start–it’s about getting to the finish line (incidentally, though, my snow ball did line up with interest rates, so I still paid off the highest first).

2.  Go All Out. This is also part of the Dave Ramsey method, but it works for me, because this is my general approach to goals.  As I’ve said, I’m not good at moderation.  I just end up getting nowhere.  Instead, I’ve made getting out of debt my way of life.  I don’t buy things and I work a million hours.  Not buying things gets a lot easier as time goes on and I’ve gotten a lot better at it.  The work, because I can’t afford the financial loss of giving up my full time job or the loss of opportunity giving up my part time job, is what I would be doing anyway, but having a goal in mind makes it so worthwhile.  Going all out means that I can see the end and it gets a lot closer every month.

3. Don’t Think of What You’re Missing, Because You’re Not Missing Anything. I’ve never been good at window shopping, so it’s best for me to just completely avoid temptation.  It’s really easy to fall into the mind trap of if I’m not spending, then I’m not living.  Spending money is fun, so it seems to follow that not spending money is no fun.  If you think too much about the pretty, shiny things passing you by and the money you’re not spending on that perfect hair cut and the fancy drinks you’re not having out with friends, then it does feel like you’re depriving yourself, but it’s surprising how many of those things you don’t miss and how much cheaper it is to drink at home (still with friends).  I’m going to enjoy nice things when I can afford them, but in the meantime, I don’t pine for nail polish colors I don’t know exist or makeup I haven’t seen in person.  It’s like a sugar addiction where the longer you’re away, the easy it is to stay away and the less you feel like you’re missing out.  If something is truly worth it, I’ll make an exception, but most of it is not worth it.

4. Keep Very Little Money in Checking. This is a personal trick I use to make myself feel poor and to make sticking to my budget a challenging game.  When I go to the grocery store with $200 in my checking account, I’m less concerned with sticking to the $50 budget.  When I go with $60 in my checking account, there are (kind of) real consequences to over spending.  I have overdraft protection, so I won’t be charged fees, but that would dip into my savings and I regard my savings as sacred.  I seem to get more out of my money this way and I feel like I have a better sense of where it’s going.

5. Count Additional Debt Payments as Bills. Dave Ramsey says to budget every dollar.  What this means for me is that I plan out every month how much I will have left after bills and food, and then whatever is left I make into a new bill for my debt.  So, if know I’ll have $700 extra, then I make a bill in my mind for $700 due to my credit card company, even though the minimum payment is only $200.  Once I have this goal in mind, I’m really determined to stick to it.  If I didn’t plan this way, I’d think, $600 toward my debt sounds pretty good, but if I know it could be $700, then I will do what I need to to make goal.

6. Don’t Use Credit Cards. I know this couldn’t be more obvious, but when you’ve had a bad relationship with credit cards, it’s hard to break the habit right away.  And when you have really ambitious goals, it’s hard not to spend on one card just so you can make your goal paying off another.  I didn’t do well with this from the start.  Christmas presents and my books for this semester were all put on credit cards even though I had the cash to pay for them.  I did it because I wanted to put that cash toward paying off other cards.  I knew I was doing nothing to reduce my total debt, but somehow it still seemed like a good idea.  It was when I realized how different it felt to buy on credit than with cash or debit that I knew it wasn’t going to work.  Credit has never felt like real money to me, so I’ve always been a little stupider in spending it.  A lot of people go to using only cash when they’re getting out of debt.  I knew right away that that wasn’t going to work for me, but using my debit card exclusively does.  That way, it’s real money I’m spending and I can easily track what I’m spending it on by using something like mint.com.

7. Indulge Your Organizational Desires. I love plans and charts.  They’re fun to me, especially when color coded.  It’s really easy to spend so much time making plans that you never actually do anything toward your goal, but since I am making progress, I’ve given myself license to waste as much time as I want planning out my money and making pretty tables.  Sure, the overall plan hasn’t really changed from the beginning, but I have the entire debt journey tracked out.  What I’ll pay every pay day and how much it will reduce the balance.  Sometimes I don’t get as many hours in as I planned or an unexpected expense comes up, and since I’ve budgeted so tightly, it’s time to reassess.  That means new plans and charts!  It may be silly to some people, but going over all the calculations and designing pretty charts makes me happy and keeps me motivated.  It’s a free thrill and that’s exactly what you need when you can’t reward yourself with things that cost money.

8. Talk About It. I travel in circles where money only comes up in sarcastic comments about never having any, usually said while throwing down a credit card for drinks.  But, I’m learning that money really isn’t a taboo subject.  People are surprisingly open to talking about it if you just bring it up, in real life and in the blogosphere.  Throughout a year and a half of blogging, I never said anything substantial about money.  The very first day I did, I heard back from a huge number of people who have been reading me most of that time, and it turns out that we all think about money–we all have to think about money.  My debt is no longer my dark little secret, so I can talk about what I’m doing and I can get support from people who want me to succeed.

9. Do It The Hard Way. Getting out of debt is just like losing weight where it’s obvious how to do it, but people still look for tricks and magic pills.  Now, I’m not saying you should be stupid about this, but most anything that isn’t common sense is going to work as well in the long run as diet pills.  You can transfer balances and consolidate and borrow money from people, but so often those things just let you prolong your bad habits.  They remove the urgency and sometimes even your own responsibility.  It’s the same logic as the debt snow ball.  If you’re just looking at the numbers, then of course you’d pay high interest debts first, but if the real goal is to be debt free, then you have to think about the psychology too.   It was such a powerful experience to accept my debts as they stood, knowing that I got myself there and I was going to get myself out by working hard and living within my means.  I’m setting myself up to really be debt free and I’m building lifetime habits, because when you do the work with no tricks, you have all the more reason never to put yourself in that situation again.

10. Accept the Challenge. I don’t know quite how to explain this other than to say that getting out of debt can be surprsingly fun.  For so long, money was a dread-filled subject for me.  I would feel the dread in my stomach every time I thought about my debt, so I took to not thinking about it.  But, it should come as no surprise to anyone that succeeding at something is exciting and succeeding at getting out of debt, once you get serious about it, really isn’t that hard.  Your hard work is worth it the moment you see your credit card balances going down.