There’s no point in sugar-coating it – debt sucks! And if you’re reading this article, you probably know what it feels like to be in debt, and are looking for that feeling of debt relief. Sometimes it’s a struggle, and other times we forget about it – but payday inevitably rolls around with the not-so-friendly reminder that yet again the bills are due. If you’ve ever set the goal of getting out of debt, you would also understand how much of a struggle this can be! When you first start, it feels daunting.
After a couple of weeks, feel like you’re finally in control. Then inevitably, an unexpected expense rears its ugly head. You lose momentum. Then – because you’ve been knocked off track and you want to feel good again, you spend your money on something that makes you feel good. To get back on track, you might try some things that aren’t really effective, but make you feel good, nonetheless. And before you know it, you’re right back where you started! In today’s science-backed article, we are here to help you cut through the nonsense and deliver the 5 best and most practical ways to stay motivated to pay down debt! Now that’s what we call a debt solution!
Psychology and Self-Education
Of course, you know why you want to get out of debt – because being in debt is obviously no fun, and you may have many legitimate reasons why your debt is a problem. In fact, you probably already know how to pay off debt! However, whilst avoiding pain can motivate some people, as humans we are prone to coping behaviours that cause us to actively avoid acknowledging or addressing that pain(1). This is why “avoiding negative consequences” is ineffective, and not a compelling enough reason to motivate us to get out of debt. Has the lightbulb gone *ping* in your mind just now? Great! From this moment forward, you can let go of that negative guilt and start afresh! Ready to go deeper? Let’s go!
It sounds cliché, but the key is shifting your focus to the positive. For the sceptics out there, we promised no-nonsense – so yes, “focus on the positives” sounds fluffy! You could technically focus on the negatives and still pay off your debts, but we guarantee you’ll be miserable doing it. Therefore, in order to effectively focus on the positives, you need to learn more about money so you can see your circumstances from a different perspective! Taking control of your financial education is one of the best ways to regain control of your financial situation! Getting educated helps you to find your “Why”.
Once you know that, the “how” and “what” to do will fall into place, and you’ll be able to get back on track quicker when those inevitable money challenges arise. Your past finances do not dictate your quality of life, and you don’t need a degree to learn how to manage money – there are so many free online resources you can use to learn more about money, budgeting and saving. By educating yourself with these free resources, you can learn how to avoid common money mistakes, discover what’s possible, enjoy continuous inspiration from positive financial influences, and look forward to a debt-free future! There are so many blogs, podcasts, books, videos and Facebook Groups out there that can help you learn! Here are some of our favourites:
Podcasts and Blogs About Budgeting and Saving
- The Dave Ramsey Show Podcast by Dave Ramsey
- The How To Money Podcast by Kate Campbell (Australian)
- The Barefoot Investor (book) by Scott Pape (Australian)
- The Richest Man in Babylon (book) by George Classon
- The Financial Diet Channel on YouTube
- Credit Counsellors Australia’s Blog (*wink face*)
Budgeting and Saving Facebook Groups
- Mums Who Budget & Save
- Budgeting, Food, Savings Ideas, Stockpiling, Life Help Australia
- AussieDebtFreeGirl - Frugal Living, Money Saving, Wealth Building Mum
- Centrelink: living on a low income, tips, hints and living frugally
A view of the bigger picture will help you see the light at the end of the debt tunnel. Perhaps your real “why” is to give your children a better education? Perhaps it’s because you want to travel! Or maybe you want to buy a house! Whatever the reason, start fresh with some new ideas, get to know your “Why” in a deeper way, write down your reason for getting out of debt, and save it in a special place.
Goal Setting and Budgeting
Start with Why
With your “Why” in mind, now you can set (and stick to) some serious goals. It’s important to be realistic when setting goals, as if they are too lofty, you won’t be able to achieve them and will lose focus quickly. Start by writing down your budget, be realistic about the amount you actually spend on each budget category per week/month/year, and calculating the difference between your income and expenditure. Then list down all of your debts.
The amount left over in your budget after all of your minimum expenses are accounted for, should then be allocated to paying down your debts. If you are financially in the red and there is no foreseeable way to pay off your debts, then it’s time to get debt help from a specialist! Our friendly team of Credit Counsellors offer a confidential, obligation-free debt assessment and will be able to guide you through some possible debt solutions and figure out which one is most suitable for your unique circumstances.
Budget Break Down
It can be pretty overwhelming to view your debt in terms of the total amount owing. However, it is scientifically proven to be that you are more likely to accomplish big tasks when you break it down into smaller, more manageable chunks(2). For example, as the first “chunk” (and if this option is available to you), it is strongly recommended to set up an emergency fund, which can help you make it through those inevitable financial road bumps without going off track. Start by saving $1000, and as you make progress by clearing out some of your debts and having better cash flow, you can slowly increase your emergency savings. For more information on this topic, check out our article about emergency funds.
The Snowball Debt Repayment Method
As the second “chunk”, we recommend using the “snowball” method to pay down your debts starting with the smallest one. The snowball method of paying down debt is one of the most easy ways to pay down debt and maintain your motivation, as you can really start seeing fast results. For the third “chunk”, crunch the numbers to calculate how long it will take you to pay off your debts and set a debt-free date! For this calculation, take the total amount of debt and divide it by your weekly/fortnightly/monthly budget surplus. Knowing your debt-free date makes becoming debt-free a reality instead of just a dream, and helps you stay on track. Whilst no doubt there will be some trials and temptations along the way, you will want to stick to your original plan and debt-free date more than if you have no idea when you will be able to achieve your financial goal!
Stay Motivated to Stick to Your Budget With Non-Financial Goals
To stay motivated, it is just as important to have non-financial goals, too! When you are reviewing your budget, be honest with yourself and identify which behaviours are causing you to overspend in certain areas. For example, if you spend too much on take away food, you could challenge yourself to have a fast-food-free month. Another awesome goal is to have a spend-free week or even just going for a walk every day. By switching out your choices for more positive ones, you can learn new ways to experience happiness and live “the good life”, whilst making an impact on your lifestyle as well as your budget!
Visual Progress Tracking
There is a lot of fluffy advice on the internet about visualisation and success! Here’s how to use the power of visualisation properly to get real results that last. As opposed to merely thinking about how nice it would feel to be debt-free (i.e. visualising yourself on the beach sipping cocktails), having a regular (weekly/fortnightly or monthly) time where you sit down and review your spending and progress, is one of the most powerful things you can do to stay on track.
The first time you do it will be the hardest, but by actually comparing your real-time results against what you had planned, this reality check will help you make the necessary adjustments that will keep you on track. In addition, you can also place a visual memento of your progress in an easily visible place (i.e. on the fridge) to remind you of what’s important, and to feel proud every time you update it. We also recommend to unsubscribe from all of the emails, apps and channels that blast you with ads and cause you to overspend – and instead subscribe to sources of information that will keep you inspired to achieve your financial goals, such as our Instagram and Facebook!
Tie Small Rewards to Goals
Another key ingredient to ensure you stay motivated to pay off debt is rewarding yourself for your small successes! Importantly, you need to practice delayed gratification by setting rules around your rewards - no progress, no reward! Further, rewards should be modest and they should be included in your budget. If you’ve worked so hard to pay off $2000 worth of debt, it doesn’t make sense to go and splurge a couple of hundred dollars, as this will derail all of your progress! Instead, it is recommended to choose an experience as the incentive, such as once you pay off a debt, treating yourself to a cheap meal out or going to the movies! Setting a long-term goal – such as allowing yourself to save for a holiday once all your debt is paid off – is another great way to motivate yourself to reach your financial finish line!
Last but not least, having somebody to hold you accountable is the final element to ensure you stay motivated and stick to your plans to pay off debt! Whether a family member, friend or professional, having somebody that you report back to on a regular (monthly) basis, to share the experience with and to praise you on your effort (as opposed to your talent or identity) is proven to help goal-setters stay on track. What details should you share with your accountability buddy?
Well, interestingly it has been shown that those who provide written progress reports are even more likely to achieve their goals, than those who do not! Further, being accountable to the process of regularly reviewing your progress and reporting back, is much more important than being accountable to the outcome of having a perfect budget every month. The idea of the exercise is to allow yourself the breathing space to make those inevitable mistakes, get some perspective and readjust your strategy, which is what will ultimately help you stay on track – and more so than if your goal is to “pay off debt ASAP”.
Pay Off Debt ASAP
The “ASAP Trap” is an unfortunately common mentality – but when we break it down, the goal of “ASAP” actually has no realistic or specific time frame, and causes more stress and guilt than good! Instead, make it your reportable goal to pay off “X amount per week/fortnight/month” and report back to your accountability partner in terms of what you did to achieve that. And when you do ask for their feedback, be sure to request the good news first, and the negative feedback afterwards. As stated above, joining an online community is another great way to get connected (but we still recommend you have somebody to hold you personally accountable)!
Debt Relief Australia
If you’ve tried all of the above to find a debt solution without success, it’s possible that you’ve become insolvent - in which case you may need professional debt help.