Episode Summary:
In this episode, we discuss simple and fun strategies for paying off debt. We often hear about good vs. bad debt, but don’t be fooled by companies trying to sell you loans. Almost all debt is bad, and if you are stuck with it, you should work hard to pay it off quickly. We share strategies for picking which debt you pay back first and ideas for making paying off your debt fun!
Episode Notes:
We talk about what debt is, the concept of good and bad debt, and how much debt the average person is in. We remind people about a previous episode covering various ways to pay off your debt.
Strategies to make paying off debt more enjoyable, and dare we say FUN:
- Decide on your why. Visualize how your life will be different when this debt is gone.
- Set a clear goal and a schedule to get there. Don’t just say $100K in 2 years; set a clear goal for each month or week to get you there.
- If you are married or have a partner, explain your plan and get them on board. Or better yet, co-create your plan. You’ll need their support.
- Reward yourself. For every milestone, celebrate success. Don’t spend a lot on this, but feel free to spend $50 on dinner to celebrate that $5,000 debt payoff milestone.
- Visualize it. If you are motivated by visualizing things and checking your progress, create a fun total meter or set of squares to color in as you pay off chunks of your debt. Visualizing the total debt you have to pay off in smaller chunks and then getting to check off or color in progress as you make it will help keep you motivated.
- Gamify it. Consider using an app, your visual tracker, or whatever you want to “gamify” paying off debt to make it more fun. You could do the game yourself or include other friends with similar goals.
- Get an accountability partner and share your results; this could be someone you know in real life or an online friend.
- Share your results with the FI community! Share them with us, and we’ll give you some positive feedback.
- As you make progress, ramp up your momentum. $100 a week might have been hard at first, but you will likely adjust and can do more after a year. Continually push yourself to do better and pay it off faster.
- When you finish, share your story. It’s a huge accomplishment, and you will inspire others.
- Throw a party to celebrate! Don’t go into debt to throw a party, but find a way to celebrate!
Top 3 takeaways:
- Unless your debt is generating incremental wealth for you, you should work to pay it off ASAP.
- Pick your payoff method and stick to it. We recommend paying off your highest interest-rate loans first.
- Celebrate your successes, however small. You want the journey to be rewarding.