Monday, August 29, 2011

Day 319 - How I Paid Off $60,000 in Ten Months

WE DID IT! We clicked the submit button and paid our last debt payment to Sallie Mae for The $60K Project! While we transition into a new emphasis on saving, I thought it might be time to explore the reasons why we were successful at paying off a large amount of debt in such a short amount of time. 

Paying off a large amount of debt requires much more than just making a budget and sticking to it. There is a distinct psychological aspect that must be present to be successful.Without the belief that you can alter your habits and are in control of your future, I don't believe you will be very successful with your debt payoff goal. Below are seven actions/thoughts that positively impacted my ability and belief that paying off $60,000 in one year was doable.

Obtain 100% Buy In. To successfully pay off debt quickly, you must be 100% committed to
the process before you even begin. Paying off debt will have a severe impact to your lifestyle - especially if you have been spending more than you make in recent years. You need to be mentally prepared to cut back significantly and live well below your means. When your friends call and want to go out on a Friday night, you need to be mentally prepared to say no. If you're not ready to do that then it may not be the time to take on an extreme debt payoff program.

Preparation is Key. Before you embark on this project, you should know exactly how much you bring home each month as well as your fixed expenses (e.g. rent, food, utilities). Once you know this information, you should be able to determine what expenses you can cut and how much money can go towards debt each month. There should be no question how much money you have to live on each month. Also, when coming up with a debt payoff goal for the year, be sure to factor in future expenses such as travel, Christmas, birthdays or family events you don't feel comfortable missing.

Establish Routine. Schedule your family budget meetings and bill paying days so that they are considered an appointment on your calendar rather than an afterthought. Creating a routine where you consistently review your budget increases accountability to meet your goal. 

Track Your Progress. Part of staying motivated to meet your payoff goal is to know exactly how much progress you have made at any given time. So go crazy with your spreadsheets, or buy a giant whiteboard and draw a giant thermometer to keep track!

Spend with Excellence. Stop spending money just because you are tired or there is no food in the house. Make sure that you have planned for these kinds of evenings with easy to prep meals (frozen, microwave, sandwiches). Using an excuse to justify eating out during the week is a common pitfall that needs to overcome with preparation.

Check Your Attitude at the Door. This, I believe, is the most important advice I could give. So you're going to be cutting back and not going out as much as you are used to. You could be really upset about this and make this a particularly miserable time period for your family. Or you could take on the challenge with a positive attitude and try to make the best of it. What will you do?

"People are as happy as they make up their minds to be" ~Abraham Lincoln

Reward Your Successes. If you reach a milestone in your payoff plan, be sure you acknowledge and celebrate it! But that doesn't mean you got out and spend a bunch of money on more stuff. Take this time to practice rewarding yourself in ways that do not require spending money and obtaining more stuff.

Stay tuned,

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