5 Realizations That Helped Me Get Out of Debt

Since I left university in the year 2000 and became an “adult” I’ve had my fair share of “personal finance fails”.

One of those was rapidly accruing considerable amounts of debt in my early working life – and another was taking forever to pay it back. Looking back now I kick myself for not making smarter financial decisions – but I guess we live and learn?

Today I’d like to focus on something very close to my heart; the psychological realizations that helped me to get out of debt once and for all.

It may have spent years dragging round a growing balance of credit card debt and student loans but the funny thing was that once I made these realizations getting out of debt actually became pretty easy.

If you’re struggling with debt right now read on to discover what helped me to reach my “tipping point” and finally get serious about living debt free…

You Wont Get Out of Debt Unless You Make It A Priority

I go to the gym at 6.30am every Wednesday, Thursday and Friday. Going so regularly you get used to seeing the same old faces each time. 90% of the people there have pretty “average” physiques.

Some are trying to build muscle while others are trying to lose weight, but there are very few people who look like either The Rock or Rick Waller. Most of us are in the comfortable average.

A few weeks back, however, a rather “large” gentleman joined. Poor guy. Sweating away on the treadmill, looking very uncomfortable indeed. Because of his size, he stuck out like a saw thumb, and I couldn’t help but consider how long a journey he has ahead of him.

Now, why do I mention him? Not to mock him, certainly. The guy has got off his ass and built up the motivation to get in shape. I wish him every success.

Here’s the thing though; it’s taken him a long time to join the gym. Many of us decided to get in shape when we were half his size. As a result we’ve been sweating away in the gym while he sat at home.

There’s no point in just dreaming about losing weight – or getting out of debt. You have to make it a priority. It has to be your major focus. The number one thing you’re going to win at – no matter what.

Once you truly decide – like our friend at the gym – that’s really when things start to change for you.

Paying Off Debt Means Changing Your Lifestyle

Very few of us have thousands of dollars of disposable income each month that we can put towards debt repayment. If you want to get out of debt as quickly as possible you’re going to have to find this money from somewhere.

This most likely means you’re going to have to stop spending on “fun” things like vacations, shopping sprees and the like – and instead put this money into debt repayment.

One of the biggest mistakes I made when paying off my debt was trying to maintain my lifestyle just as it had been. I wanted to pay off debt, but not as much as I wanted to go out drinking with my friends on the weekend, or eating out in nice restaurants with my girlfriend.

I didn’t see that the two options were largely opposites; maintain the lifestyle that had helped me get into debt, but stay in debt forever more, or alternatively change my lifestyle to one more conducive to debt repayment.

We’re talking about a more frugal lifestyle, where I derived pleasure without spending money. An example might be watching a DVD at home rather than spending four times that money going to the movies.

If you’re serious about becoming debt free it makes sense to consider your lifestyle – and be willing to change it for the better. Cut those expensive hobbies or shopping habits. Embrace a low-cost lifestyle and reap the benefits.

I don’t claim it won’t be hard. But it will be worth it. Remember our friend from the gym? The first few weeks he started showing up must have been painful for him – mentally and physically. He must have ached. He must have been hungry. He must have felt intimidated. But he did it.

Soon enough going to the gym will be the “norm” for him – he’ll have got over the hump. And as his weight – and your debt – starts to drop rapidly suddenly those lifestyle changes start to look very worthwhile indeed.

You Can Make Big Changes Quickly, Or Small Changes Slowly

How do you like to pull a bandaid off? There are two trains of thought – some people peel it off ever so gently and slowly, hoping to retain as much hair as possible. It takes forever but it’s only slightly uncomfortable.

On the other hand some people rip it off in one rapid movement; more painful but over in a flash.

Paying off debt can be rather like this. You can either make big, short-term sacrifices, or smaller, long-term changes.

Personally I opted for choice number one. I decided that a few years without vacations was worth the ultimate freedom. I decided to hit it hard – and get the painful process over once and for all.

Too many people choose the second option, and then take the rest of their lives to get out of debt.

Make the decision to hit it hard – and go rip that bandaid off like it’s on fire. Remember: it might hurt more in the short term, but once you’re done you’ll be able to sit back with a smile on your face while people all around you are still gently trying to peel theirs off.

You’re Going To Have To Pay Off Your Debt Sometime: Start Sooner, Finish Sooner

At Christmas last year I decided I was overweight and wanted to sort myself out. This year – so far – I’ve attended the gym regularly and lost just over two stone in weight. I plan to lose one more before the end of the year. So far I’ve gone from a 38″ waist to a 34″ waist.

When I decided to get started, a did some rough calculations. This year is going down as my year of weight loss. And a year seems a long time to be eating salad and getting up at 5.30am to hit the gym before work.

Now I’m over half way through of course I’m seeing the results and have really started to enjoy the process. I’m actually finding myself getting more motivated as time goes on because I can see the end in sight. Maybe those washboard abs aren’t a pipedream after all?

Now consider our friend from the gym. For me, the entire process is likely to take less than a year. For him? Probably three years – if he doesn’t quit on the way. THREE YEARS! That’s a long road he’s got ahead of him; that’s for sure.

The lesson here is that if he got started sooner, he’d have less to lose, the road would be shorter and he’d hit his goal sooner.

If you’ve got debt, the obvious reality is that the sooner you get started paying it off, the sooner you can become debt free. Don’t let things get out of hand; make yourself a promise and start today. When you do, it’ll be so much easier to reach your eventual goal.

Debt Is Stealing The Joy of Life

Being a personal finance nerd I like to keep an eye on my finances. Tools like Personal Capital can make it easy to track your spending so you know where your money is going each month. I still remember the day when I was going over the month’s spending and decided to figure out what they would look like without debt.

So I went through my figures, and eliminated anything that was debt-related – any payments I’d made to loans, credit cards and overdrafts. Then I totted up the savings. The figure was both depressing and staggering.

Hundreds of dollars right there.

My mind started to wonder; if someone started handing me that pile of cash each month – what on earth would I do with? Maybe I could work part time instead of my 60 hour-a-week job? Maybe I could go on some nice vacations? Maybe I could buy that motorbike I wanted?

Suddenly my mind was filled with possibilities.

I also realized that getting out of debt is essentially like giving yourself a giant payraise. Without having to take on any extra responsibility or work any more hours.

How powerful is that?!

Just imagine how you’d feel to land a $500 a month payraise, for example. Pretty good, eh?

The reality is that debt does the opposite. Debt reduces your options and keeps you tied, while paying it off gives you freedom. The sooner you can get yourself out of debt, the sooner you can enjoy this boost in finances equivalent to a healthy payraise at work.

What have been the most important lessons you’ve learned about money? Please leave your thoughts in the comments section below…