Posts Tagged pay off debt

6 Things We Gave Up to Get Out Of Debt

In order to get our consumer debt paid off, my husband and I had to be willing to give up some things. We had to consider what aspects of our spending behavior we needed to change so that we could hit our goal as quickly as possible.

Here are the six things that we decided to give up in order to help us pay off our debt:

“Browsing” at our favorite stores:

The more time I spent browsing, the more I realized that there were items out there that I didn’t even know I “needed” and ended up buying. When I did our spending analysis at the beginning of our debt journey, what I found were my weaknesses for Target and the drugstore. That’s where I tended to get into the most amount of trouble when it came to spending impulsively.

I quickly realized that if we were going to get out of debt, browsing in those stores wasn’t something that I could be doing any more as too much money was getting wasted on items I didn’t need.

Shopping without a list:

Whenever I shopped without a list, my focus was easily diverted to all of the other things that I might “need”. In order to cut back on the amount we were spending, we learned that we needed to not only shop with a list, but stick to the list.

Shopping with a list included more than just groceries. When we need clothing, or anything else for that matter, I’ll do an inventory of what we have and then come up with a list of what we need so that when we go into the store we are not as easily distracted and wasting money on items that we don’t need right now.

New clothes:

Instead of shopping at the regular retail outlets, we now shop for new-to-us clothes at the thrift store. In doing so we have saved a lot of money, cutting our clothing budget in half. In order to save even more money, my favorite day to shop at the local thrift store is on their 50% off day.

Convenience food:

One of the biggest ways we saved on our grocery budget was to give up many of those convenience foods that are pre-made or pre-packaged. Many of these processed or pre-made foods tend to be overpriced and you can do it yourself for a lot cheaper. We make our own bread, pancake mix, hot cocoa mix, side dishes, and pizza. Not only is it just and easy to make these things, it’s also comforting to know exactly what’s in it.

Free time:

In order to get our debt paid off, we were also willing to give up some of our free time to generate an extra income, giving us more money to throw into our debt snowball. Both my husband and I have our respective “side hustles” that allow us to use our talents or interests to earn even more money.

Living life without a budget:

budget money

Living on a budget focused our spending and allowed us to gain control of our money. Having a plan for our money allowed us to see how much we needed to live and get by and then how much money was left that we could throw at our debt. Once we got on a written monthly budget, we truly felt as if we had gotten a raise because we were now telling our money where to go instead of wondering at the end of the month, where it went.

Your Turn!

  • What are you willing to give up to get out of debt?


Four Reasons Why We Stayed In Debt

Our debt story began when I was 19 years old and I got my first student loan and credit card. Fast forward 18 years, a marriage and two kids later, we had to come to terms with the four main reasons why we stayed in debt for all of that time.

 At 37 years of age, I found myself staring at close to $59,000 worth of debt (a long way from that initial $500 student Visa card I had signed up for). Confronting the reasons why we had stayed in debt so long and changing our mindset about debt, finally gave us the motivation we needed to get it paid off.

We thought we had plenty of time:

My goal was always to be debt free by the time I retired. I understood at a young age that heading into your retirement years with debt wasn’t a wise financial decision. The problem was that in my 20’s and early 30’s, I still thought I had plenty of time to get my debt paid off.

I wasn’t in any rush, because I didn’t feel any sense of urgency. Not until I hit my mid-30’s. Once I hit that age, I realized that if we kept going the way we were, spending without a plan, and not putting a thing towards savings, my husband and I were going to be in deep financial trouble.

The other kicker came when I looked at what was being spent on debt-repayment. At the time our debt repayments totaled just over $1000 each month. Looking at the total amount paid, rather than just the individual minimum payments, forced me to see how much money we were throwing away and paying the bank each month, when if we had been smarter with our spending, could have been paying ourselves in the form of retirement investing.

We used our line of credit and credit cards as income:

Because we weren’t on a budget and had no idea where the money was going each month, we found ourselves relying debt to help us get through the month. If the bank balance was getting low, and I still needed to get some food or clothes for the kids, out would come the credit card.

After years of doing this, it really became a vicious cycle of using debt to either pay for the things that we needed, as well as the stuff we wanted. We also got into the trap where I would find that I was paying debt with debt (using Visa to pay MasterCard) if the money was tight at the end of the month and the bills were due.

In order to break out of this vicious cycle, we got on a monthly budget so that we could control our spending, account for our spending, and break the ties with the credit cards and the line of credit once and for all.

“At least we’re not as bad as…”

All of our friends had debt, so I found myself getting into the trap of thinking that debt was normal. Everyone seemed to have debt, so I wrote off the fact that we had debt as “No big deal; We’re just like everyone else”.

I also found myself playing the comparison game. One of my favorite shows on TV at the time was “‘Till Debt do us Part” hosted by Gail Vaz Oxlade. On this show, she would feature families who had gotten themselves into debt and were looking to get out of it.

Instead of being inspired to get out of debt ourselves, I found that I would compare our financial situation to the families featured on the show, and thought, “Well at least we have less debt than them”, as a way to justify and feel better about where we were financially.

Keeping up with the Jones’s:

american dreamThe last reason we stayed in debt as long as we did was our desire to keep up with the Jones’s. I would look at the lifestyles of those making a similar income to my husband and I and felt that we should be able to afford the same types of things.

Where we went wrong was that we didn’t plan or save for major purchases or vacations, we just went ahead and charged them. The down payment for the mini-van, new furniture, and our family vacation to Disney World were all courtesy of MasterCard.

What we have since learned is that we can have all of the things that the Jones’s have, we just need to plan ahead and save up for them first by budgeting and setting aside money into our sinking funds.

Your Turn!

  • What are some money mistakes that you’ve made that kept you in debt?
  • What mindsets did you have to change to pay off any debt you had?

Using Cash to Stay on Budget

When I was young my mom used to joke that cash would burn a hole in my pocket, if I had cash on me, I felt the urge to spend it. Needless to say then, I was a little apprehensive to use cash to stay on budget, but since making the switch I would never go back to using plastic.

cash is king

Why Cash is King

  1. Psychological: When you spend cash, research has found that you feel it more than when you swipe a card. It hurts a bit more when you see your hard earned money leaving your hand, which means that you’re less likely to purchase things that you don’t really need.
  2. Easier to stick to your budget: When the cash is gone it’s gone so you know when it’s time to stop spending. Our cash categories include groceries, personal spending money, clothing, as well as setting aside money for any smaller miscellaneous expenses (think field trip notices from the school or birthday party gifts). When my personal spending money is gone, I know that it’s time to hold back on spending any more money until the next month. paying with cash
  3. No risk of going into debt: I know several people that swear by their credit cards because of the points that they get. I also know that nobody signs up for a credit card with the intention of getting deep into debt, but the reality is, according to statistics, the average card carrying American household owes $16,048. If you commit to using cash, you don’t have to worry about overspending and dreading the monthly credit card statement.
  4. Delayed Gratification: Spending cash means that there are times that you will need to save up for a bit before making a larger purchase. This will give you some time to really think through the purchase and decide if it is in fact something that you want to do. If you decide that you do want to invest the time to save up and pay cash, you leave with with not only your purchase, but a great feeling of knowing that you were financially responsible, did not act impulsively, and know that you were able to do it without going into debt.
  5. Less Guilt: Imagine what it would be like to go shopping without any guilt at all.  When spending with plastic, it’s easier to make impulsive purchases because you don’t feel as if you’re parting with your money which puts you in a position where you’ve come home with unplanned items and guilt. When you budget and use cash, you are giving yourself permission to spend which means nothing but guilt-free shopping trips.jar with coins
  6. *BONUS* The Change Jar = Extra Savings: When you use cash for your daily and weekly purchases, you are going to end up with a lot of spare change. Put this change into a jar and you’ll be amazed at how much you have saved up by the end of the year without even realizing it. Last year I managed to save up enough coins to cash in $160 which paid for my daughter’s Christmas stocking stuffers!!

Your Turn:

  • What categories could you use cash for to help you stick to your budget?