I don’t know why people like to write instructions for getting out of debt. No one needs them okay? The instructions are easy: pay regularly, and don’t use more credit until you’re done. If getting out of debt was some kind of toy, it would be like a Lego kit with two bricks. Forget that. The difficult part to getting debt free lies in your habits, and those are a pain to change:
1. They Talk about Their Repayment Plans to Others
Andrew (not his real name) was in debt for over a decade. The self-employed businessman has since paid off $110,000+ in debt, mostly thanks to counseling and recruiting support.
“You really can’t get through it alone,” Andrew says, “I only started to pick myself up when I asked my close friends to help me. Not by lending money ah!
I would just explain to them about my debt, and what I was doing about it. Even if it was painful to talk about, I forced myself do it, and do it regularly. They were very encouraging, they used to treat me to small celebrations, whenever I hit a milestone.”
Andrew also appointed friends as behavioural enforcers, when:
“I would tell them every quarter, that I would reduce the debt by such-and-such an amount. And when I declared it to them, I would feel greater motivation to stick to the plan. Just saying it aloud to them helped to change my behaviour.”
2. They Work as Fast as Possible
Ideally, you want to pay off high interest debts within two years. The reason is simple probability – the longer you wait, the greater the chance of encountering another crisis. You don’t want to discover a medical condition when you’re still struggling with your credit card debt.
Louisa Cheng, who recently paid off $17,000 in credit card bills, says it’s also an issue of limited willpower:
“Paying off debt is like being on a strict diet,” she says, “However strong your willpower is, it is not infinite. You will run out. Toward the third or fourth year, I found it really hard to pay off the last of my debt.
I started to slack off a bit, and use the credit card again. I bought a new phone, went to restaurants, and all that. But I was so disciplined at the beginning that I didn’t go out at all in the first two years.
So between a more painful period of thrift that lasts one year, and a more relaxed one that lasts three years, I would definitely recommend the former. It’s easier to cope with suffering when its end is clearly in sight.”
3. They Actively Manage their Debt
If your solution to debt is to mindlessly throw money at it until it goes away, then you now know the reason you got into debt in the first place.
The people who get out of debt don’t just throw “any amount I can afford” at it every month. They actively make loan enquiries, and look for cheaper ways of borrowing money.
Almost any kind of loan – including hocking your stuff at a pawn shop – is going to be cheaper than your credit card (about 24% interest per annum). Smart people stay on the lookout for the cheapest loan, and try to transfer their debt.
Andrew says his first move was to “take out a personal, and use it to pay off the higher interest loans. Especially all the credit cards.”
4. They Save While Repaying Debt
See if this sounds familiar: You get paid, and throw most of your income at your credit card payment, lowering the debt significantly.
A week before you next paycheck, something goes terribly wrong – your cat gets sick, you back into someone’s car, or your girlfriend walks into Ion. Suddenly the old credit card is out again, and you’re spending as much as you put in.
Belinda, who only recently managed to pay off her credit card bill, says it was due to “finally realizing I still need to save while making repayments.”
“I would set aside at least a little bit, $120 or so every month, in addition to the repayments. Then whenever something went wrong, I could take it from the savings without using my credit card again.”
5. They Look Beyond Their Jobs for a Temporary Income Boost
Joseph (not his real name) is a design consultant, and about three months ago his debt added up to over $15,000. A few weeks ago he paid the last of it.
“At first I already worked out a repayment plan and everything, I thought it would take me years to pay back,” Joseph says, “But after I shared it with my cousin, she took a step I didn’t think about.
She told me to answer a few online ads. And within a few weeks I got a lot of extra projects on the side. It almost killed me, doing them on top of my job. But thanks to them, look at how much faster I paid up.
I think the solution is definitely that you have to be willing to work harder. You have to find the extra income. If you want to just sit on your hands and pay from your salary, you will suffer for I don’t know how many years.”
Got any debt busting habits? Comment and let us know!
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