Climbing The Debt Mountain
May 29, 2015One of the things I love to see is a different perspective. When we hire a new financial planner on our team, they offer a lot of “new employee energy,” a fresh set of eyes and a different life experience to the table. Fortunately, we recently hired Cynthia Meyer as a part of our team and she sent me this blog post about her view on a very common type of call that we see on our Financial Helpline. I like her approach…
Climbing the Debt Mountain
By Cynthia Meyer
How do you deal with a mountain of debt? This is a question we hear a lot from callers on our Financial Helpline for employees whose employers provide a financial wellness program. Tackling your debt can be highly frustrating and stressful, and it can take a toll on your emotional and physical health. Yet living free of credit card balances and personal loans is critical to achieving financial wellness. How can you surmount what seems insurmountable?
Choose your mountain. Set a big goal with a realistic deadline, e.g., “In three years, I will be free of credit card debt and saving for a down payment on a house.”
Map out a route. Use this Expense Tracker to find areas in your spending you can reduce or eliminate so you have more money each month to pay extra on your debt. Brainstorm about extra ways to bring in cash by starting with this blog post on ways to make more money. Create a plan to power down your debt by entering your credit card and loan balances into this Debt Blaster .
Build your strength. Small, consistent actions over time will help you build your financial muscles. Whenever possible, pay cash. Don’t buy anything on a credit card you cannot pay off when the statement arrives. Bring your lunch and bank the savings.
The little things add up over time. Track your daily expenses using personal finance software like Mint or Yodlee. Set aside an hour a week to total up your expenses, compare them to your spending plan and pay bills.
Have the right equipment. Getting out of debt is more than just doing the math. Sure, a calculator or a spreadsheet is essential to get a realistic picture, but you will also need emotional equipment to climb the debt mountain. Cultivate your resilience and determination by accepting where you are and having a sense of humor about your journey. You cannot change that the mountain is in your path but you can have some fun climbing it.
Follow a guide. Get inspired and stay motivated by tapping into encouragement from your local library. My favorite debt reduction guides include Dave Ramsey’s The Total Money Makeover, Jerrold Mundis’ How to Get Out of Debt, Stay Out of Debt and Live Prosperously and Julia Cameron’s The Prosperous Heart.
Walk with friends. Create a support system for yourself to keep you motivated. Organize a group of friends who are committed to working on their finances or check Meetup.com to see what is already available. Spend time together regularly to work on your expenses, take a free financial education workshop and/or discuss a financial book. According to a Bankrate.com survey, more than one third of Americans have as much or more credit card debt than emergency savings, so it may be easy to find companions to climb with you.
Prepare for altitude sickness. The first three months after going cold turkey on incurring new debt can be uncomfortable. This is where you discover how much you really have every month and start adjusting your lifestyle to live within your means. Make sure to schedule fun activities that are low or no cost to keep your spirits and energy high.
Celebrate each day’s accomplishments. Your mountain is going to take some time to climb. Congratulate yourself for each day’s worth of progress. Focus on the daily wins. By putting one foot in front of the other, you will eventually get to the summit.
Frame your certificate. Once your debt is paid off, celebrate! Find a tangible way to congratulate yourself for a job well done. If possible, frame it and put it on the wall so you can remind yourself of your huge accomplishment. You earned the bragging rights.
Set a new goal. Now you have strong financial muscles and much-improved cash flow. What will you do with that money you had been using to pay down your debt? Find a new mountain to climb like building an emergency fund, saving for retirement or buying a house. As a veteran mountain climber, you are ready for the next big challenge!