In a perfect world, you would be consumer debt free. You wouldn’t finance a car in a perfect world, much less your new state of the art stationary bicycle. The truth is that the overwhelming majority of households do carry consumer debt. This not only impacts your future, but your present ability to spend as well. Getting out of debt is often viewed as its own thing, yet it’s intrinsically linked to your budget. Certainly, if we took a poll and asked if you should have consumer debt participants would agree this isn’t financially healthy. So why do we continue to finance things we can’t pay for in cash? What do you do if you’ve made progress in your financial health but aren’t yet debt free? And what does your budget have to do with it?
If you’ve made the decision to work toward becoming debt free you’re tracking in the right direction and I’m so proud of you. One of the hardest things about becoming debt free is starting. Facing the reality of your financial health is hard. Combing through your expenses and setting limits for spending is even more difficult. But once you start to see the progress of increasing your savings account or decreasing your debt it can become easier to make the necessary adjustments to your spending. But how do you keep up this momentum? First, you have to face reality.
The parallels between fitness and personal finance are frequent. Think about New Year’s Resolutions. How many times have you or someone you know swore this year was going to be the year you were going to get fit? You were going to frequent the gym, cut out soda, and all those carbs too. In my experience, traffic really starts to slow in the gym around Valentine’s Day. Is it because you don’t want to be more fit? No, it’s because going from 0 to 100 is not sustainable. This is true with your finances as well!
From a strictly mathematical perspective you should eliminate all discretionary (unnecessary) spending. I’m talking no dining out, no Netflix subscriptions, and absolutely no late night perusing of Amazon. Eliminating all spending which isn’t vital will absolutely help you achieve your goals quickly. But how realistic is this over the long term? If you’re trying to build savings and eliminate debt you might have a significant journey ahead of you. Are you prepared to cut out “fun” spending for the foreseeable future? No, probably not.
Here are five ways to maintain momentum and ensuring you become debt free (for real this time).
1. Build in “fun” expenses.
You have a vice. Maybe it’s fast food? Your morning coffee? The Amazon app? You need to build this expense into your budget. It’s unrealistic to think you’re going to quit cold turkey. Start by scaling your spending back by 25%. Were you spending $100/month on coffee before? Start by reducing this spending to $75. Better yet, purchase a $75 gift card at the beginning of the month, load it to your app, and then un-sync your other cards.
2. Find an accountability partner
If we jump back to our fitness analogy, there’s a reason why some groups yield so much success. “Coaching” groups and groups with meetings often produce successful clients. The truth is they aren’t offering a superior product. In fact, some don’t offer a product at all. It’s the associated service that breeds success. Most people need an accountability partner to help them achieve their goals. We’ve built an entire brand around knowledge and accountability. It works. Find your accountability partner. Hint: it could be us.
3. Remember that even no “progress” can be progress
Life happens. If you’ve been budgeting really well, building your emergency savings, and then something big happens like the car needing new tires you’ll likely feel defeated. Try and remember that before you might have had to finance this purchase. Paying cash for something over financing it is still a financial win in my book.
4. Don’t be too hard on yourself
You’re going to slip up. If you bust your budget, own it, reset, and move forward. Don’t let this slip-up snowball through the next payday. Give yourself some grace, but then keep moving forward.
5. Remember this is more about lifestyle than achieving a specific goal
I want you to have an emergency savings account, to fully fund your retirement, and to purchase your next car with cash, but the reality is that none of these things can be accomplished by making just one positive financial decision. It requires a different mindset toward your money and an understanding of how this mindset is the tool that can be used to enhance your life’s goals. It might sound cheesy or cliche but this is about lifestyle change, not only about eliminating debt. Can you live without fast food and Amazon forever? I know I can’t. It’s about (responsibly) working these things into our everyday lives while staying focused on the future.
Now’s the time to be proactive. We’re headed for more shaky ground economically. Unemployment numbers have decreased, but there will be more layoffs. You might find yourself in a position of reduced or even eliminated income. It will be much easier in the short term if you’re able to take control of your financial life before change is forced upon you. So, stop guessing when it comes to your budget, give yourself some boundaries, and work toward sustainability. You’ve got this.
As always, Hey Money has your back if you want the guidance and encouragement we can offer you on your journey. You can even talk to me personally! To learn more about our super affordable memberships, go here.