On paper, repaying debt seems incredibly simple – and, in truth, it can be simple. When broken down, repaying debt is a process of:
- Calculating how much you owe and to whom.
- Creating a plan to repay the amount you owe, either by increasing your income, consulting for advice for consolidating your debt, or cutting your expenditure to the bone.
- Following through with your plan month by month, making payments and managing your relationship with your creditors.
- Then, after a period of time, your debt repayment is complete, and you can embrace the debt-free lifestyle.
However, there is part of this sequence that tends to be somewhat problematic: “following through with your plan”. It’s this step that tends to catch most people out – but not necessarily for the reasons you may initially expect.
Most people who have acknowledged the reality of their debt are able to make the lifestyle changes required to pay the debt down; this isn’t easy, but it is manageable when you reach a certain point and realize that your debt is holding you back. Upon this realization, most people genuinely can commit to better financial management, a smaller budget, or ensuring they meet their consolidation repayments – there is definitely a “point of no return” when most people realize that they have to make these changes, but that the short-term sacrifice will be worth it for long-term gain.
No, it’s not the financial and lifestyle changes that are the problem: it’s the sheer amount of time repaying debt takes. Many debt repayment plans or consolidation repayments will last for years, and staying focused throughout this period can be incredibly difficult – especially when your usual lifestyle has been changed through the need to cut costs. If you’re currently committed to a debt management plan but are struggling with the sheer longevity of the process, then here are a few helpful things you may want to keep in mind.
#1 – Your total amount owed figure will begin to fall in time
In terms of keeping your morale high, this is an incredibly important point.
When you first begin repaying debt, your overall amount owed won’t seem to move very much on a monthly basis – in fact, it might even grow. This is because you are still paying a large amount of interest and, potentially, compound interest. However, as time passes, interest will be less of a factor, and you’ll begin to see the total amount owed drop dramatically.
This factor is another reason why debt consolidation tends to be a popular choice, as you pay a set amount, and can predict exactly how much your debt will fall by each month. It’s well worth exploring this option if you’re concerned that the initial few months of little debt reduction, while you get the interest under control, could have an adverse impact on you emotionally.
#2 – All progress is good progress
If you wake up on Monday morning owing $10,000, and go to bed on Friday evening over $9,999, then you’ve made progress. No, it’s not necessarily at the kind of speed you may hope – but when repaying debt, any progress is good progress. In fact, in the first few months, just being able to keep your debt static – rather than growing due to interest – is progress.
This kind of thinking can also help to influence your contribution to your debt total. Let’s say that you do your grocery shop for the week, and it cost $1 less than you budgeted. You might think to use that $1 to repay a debt a little quicker, but the amount is so small, it doesn’t quite seem worth it; it just doesn’t offer sufficient progress, so you spend the $1 rather than putting it towards your debt.
However, if your grocery spends were to be $1 less every week for a year and you were to use each $1 to pay off a credit card, that’s $52 in total – and that’s on top of what you’d planned to repay anyway. Small amounts can build up to big, progressive amounts that truly can help you to reach your debt-free goals far quicker than you think.
#3 – You’re learning the habits that will sustain you for the rest of your life
It is unrealistic to suggest that paying off debt is a great experience. You will have days when you don’t want to be tied to your budget, and when you feel somewhat stifled by the constant financial focus. These days are tough, and it’s important to acknowledge that they can and will happen.
However, when the bad days strike, try to remember that you’re effectively learning good behavior that will significantly benefit you for the rest of your life. Yes, that day is tough, but the lessons you learn and the experience you gain will stand you in good stead for the future – so try to frame your bad days as contributions to a larger goal.
#4 – Investigate if a change of strategy is possible
If you find yourself experiencing a succession of bad days, or your debt isn’t reducing at a rate you thought it would, then you don’t need to accept this. The plan for repaying your debt should be flexible; if something isn’t working, then switch and experiment with another idea.
If you try to stick to a plan just for the sake of it, you’re effectively backing yourself into a corner of your own making. What works for some people won’t work for others, and it could be that you’re struggling because you haven’t found the right solution for you. Channel your energy into investigating alternative methods of debt repayment, or even calling your creditors off-the-cuff and asking if they have any suggestions to help you erase the debt more effectively – they might not, but there’s no harm in asking, and at least you can content yourself with the knowledge that you’ve explored every possible avenue to try to speed the process along.
In conclusion
Your path to debt freedom may be a long, winding experience that challenges you on a daily basis, but focusing on the ideas above may well help to make the weight of time a little more manageable.