I wasn’t always good with money. As amazing as it is to say we paid off $107K in 33 months there were many years before that where I failed with money and debt. When I wanted to pay off debt it went nowhere fast. For all the success stories one hears online, there are many more stories of frustration and failure. So that you can find success where I didn’t, here are 7 reasons why I failed at paying off debt and how you will succeed.
7 Reasons Why I Failed At Paying Off Debt and How You Will Succeed
I hope that you are crushing it with your debt payoff, but if you keep getting stuck, here are some potential reasons why.
1. I Thought I Didn’t Have Enough Extra Money
When I got out of school and was single I had about $75K of student loans and $10K of credit card debt. How was I supposed to pay that off? I didn’t even make anything close to that in an entire year!
I would have needed a windfall to make a dent in that.
Well, maybe not, how about a budget?
I didn’t have a budget so how was I supposed to know what I had extra to put towards debt? I just assumed I didn’t have enough extra to pay off debt.
Therefore, I never put in a true effort because I limited myself from the beginning. That ended up costing me thousands of dollars as a result.
How To Find Extra Money To Put Towards Debt
The simple answer is to create a budget. I know it isn’t exciting, but it is the only way you will know how much money you have available to spend on debt. The trick is to track your spending. Use an app such as Mint to see where your money is going and use that to inform your next budget.
Through a combination of seeing your spending habits, and making some easy cuts, you will see how much money you can put towards debt each month. I guarantee it will be more than you think.
The critical part here is to realize that this extra amount does matter. It may not pay off all your debt at once, but it will add up over time. This extra money could save you thousands of dollars otherwise paid towards interest.
If you want to do things the old school way, and write it out with pencil on paper, use this budget planner.
2. I Wouldn’t Say No To The Small Things
It was obvious to me that I shouldn’t be making big purchases without careful planning and considerations. In fact, I didn’t do that. I didn’t go on vacations, buy a TV or new furniture even if I didn’t have a kitchen table.
So, what was the problem then? I ignored the impact of small purchases and how detrimental they can be to any financial plan. $10 here and there really does make a big difference.
As mentioned previously, I didn’t have a budget. Therefore, I also wasn’t tracking my spending and seeing how much each of these small purchases were really costing me.
Checking your bank account to see if you have money in the bank is NOT the same as a budget or tracking your spending.
What I realized after the fact, was that these small purchases were adding up to the amount of the big purchases I had said no too.
Any progress I had made on my monthly spending by saying no to the big items had been lost.
How To Say No To The Small Things
Once again, the budget is a big part of this. Not just in understanding how much you can spend, but by budgeting for the small things it shows that you can purchase some small things.
It just means you can’t purchase all small things.
When making your budget prioritize your spending in a way that you get the small things that really matter to you.
What we need to eliminate is the unconscious or lazy decisions that lead to you blowing your budget. If you find yourself saying “I owe it to myself” then you are making a horrible decision not based on budget but on emotion. Don’t spontaneously spend money if it isn’t in the budget.
Review your habits. Do you find yourself buying more stuff at the store than you planned to? Did you eat out more than you thought?
- Take your lunch to work and even have some backup meals in the freezer or your desk.
- Drive home a different route if you always stop and get coffee or a snack.
- Shop with a grocery list and only buy off the list.
- Establish an amount of times you will do something each week. Examples are eating out twice a week or getting coffee once a week. That makes it very clear what you can and can’t do.
- When saying no, picture what it is you really want in the long run.
3. I Didn’t Have A Plan
I assumed that someday I would be out of debt yet had no plan for when that would be.
You can see the problem with that mentality. I just left it up to chance rather than providing myself a roadmap for how to get there.
I didn’t know where to start or what it would take to get there.
The issue was that I hadn’t wrapped my head around the entirety of the issue. I knew my credit card debt was bad but wasn’t really sure about the student loans. Those are ‘good debt.’ Right? No. Not when you are paying them off. No debt is good when you are paying it off.
My plan was basically make the minimum payments and if I have anything left, then put that towards debt. That is not a plan for success. Too much is left up to chance.
Create A Successful Plan For Debt Payoff
The first thing that you should know is to keep it simple.
There is lots of advice out there for what to do. The key is to find what works for you and to stick with it once you find it.
Here is the big secret and foundation to any plan that works.
Spend less than you earn and pay off debt with the remainder.
You do that enough times you will get out of debt. The more money you have at the end of the month, the quicker you become debt free.
We need a framework though for which you will pay off the debt. Here are my 6 simple steps to get out of debt which is a comprehensive approach to debt payoff and financial success.
If that is too much right now, focus on the first step to get out of debt to learn where to start.
Here are two books that I highly recommend as well.
4. I Didn’t Have An Accountability Partner
As I previously mentioned, I was single at the time. I should have been accountable to myself, but I wasn’t.
When I did want to pay off my debt it was easy for me to flake out because I could always justify it with an excuse to myself.
If I had stated my goals and debt payoff plan to a friend or family member, then I would have been more likely to stick with them and succeed.
How To Find An Accountability Partner
For me, my accountability partner became my wife because I never sought one until after I was married.
From the moment we got married I knew we had to be on the same page and be responsible to each other.
For those of you that are married, your accountability partner is your spouse. I would still encourage you though to seek out a friend or family member that you trust to help you along your way.
If you are single, find a friend or family member. If you don’t have someone then find a resource online or even start a blog about your debt payoff journey. So many successful blogs started that way and they were more successful achieving their goals because of it. Your audience becomes your accountability partner in that case.
You need to share everything with them (no account numbers or passwords of course). This includes how much you owe and your overall plan so they know if you are on track or not.
Studies show that you are more likely to be successful if you publicly state your goals because you feel a higher sense of obligation.
This can’t be someone who will enable you. They need to be both firm and loving as well as a resource for when you are struggling. Ideally, it will be someone who is good with money themselves.
5. I Didn’t Believe It Was Possible
I think this was the biggest problem overall. By simply not believing that I could pay off this debt ahead of schedule I let it become a reality.
Not having a budget or plan contributed to this, but even then, I was limiting myself mentally to begin with.
I had never heard of anyone paying off the amount of debt I had. It is easy to fall into the trap of being a victim or blaming others for my situation.
I heard of people paying off lesser amounts of loans in 10 years or more by making the minimum payments. Therefore, that is what I figured would happen. As a result, I limited myself to that track.
There is no shame in just making the minimum payments. But, it does feed into the typically attitude one so frequently hears about affording the payment on something.
We have been conditioned to believe that if we can afford the payment then it is OK for us to buy or borrow.
Once you get out of that, I promise you won’t want to return.
How To Believe You Can Pay Off Debt
This was one of the biggest turnarounds I experienced. So, what led to it?
I found the Dave Ramsey radio show. In it, he has a segment where listeners called in to do their debt free scream. Through that, I realized that I was not alone and that others had paid off more debt and did so making less money than I earned.
I realized I had no excuses left, but furthermore, it became normal for me to hear these stories. I started to believe it was possible.
It became my new reality.
So, look for inspirational stories that you can relate to. See what they did to get out of debt.
Most of all, do not underestimate yourself.
Once you believe, you can do your very own debt free scream in his studio.
6. I Wasn’t Mentally Committed And Had The Wrong Frame Of Mind
I wanted to be out of debt, but was I willing to do what it took to get out of debt?
To pay off debt there needs to be some willingness to make changes. Since I never fully committed in my head, that never happened.
It is tough to say no if you aren’t committed or don’t believe.
My frame of mind was still stuck in the idea of making minimum payments and my decision process followed. This was a very casual approach.
Instead of thinking, I could put this money towards debt, I thought I could put it towards something else and still have extra towards the debt. That just gave me more of the same.
How To Find The Right Frame Of Mind
This is where it is critical to understand why you are paying off your debt.
Obviously, it is nice to not have debt. But what can you do without the debt?
How will your life change by being debt free? What beyond money will you gain?
A good book to help you look deeper into your why is Your Money or Your Life by Vicki Robin. It goes beyond debt payoff, it looks at your whole relationship with money and how you can find the life you want to lead.
Once I had the appropriate frame of mind I had something to base my decisions on. I could see the tradeoff from buying something to paying of debt and where I could end up.
7. I Put It Off One Day At A Time
Going back to the idea of not being able to say no to the small decisions, it also resulted in me constantly putting it off.
I never drew the line in the sand to say no. I just figured it didn’t matter and that tomorrow was a new day.
The problem is that tomorrow never comes. You can either focus on your debt today or tomorrow.
Today yields results. Tomorrow yields empty promises.
Say Yes To Today
There is no better time to start handling your money right than today.
It can even be in small steps, but it has to be something.
If you are sick and tired of being sick and tired, today is the day it stops.
Take action and start your debt payoff or get it back on track.
“Checking your bank account to see if you have money in the bank is NOT the same as a budget or tracking your spending.” OMGosh, that cracked me up! Unfortunately, I’m afraid it may be all too true for a lot of people.:-(
Saying no to the little things and sticking to the list when going shopping were two habits I had to learn in order to get better control of my finances.
I know this from personal experience so it is one of those ‘it’s funny because it’s true’ statement that you just have to laugh at. I would check that bank account and make sure I could pay my bills, but had no plan otherwise on a daily basis. Later that month I would wonder where my money went. Gee, I wonder? Glad you recognized where your money was going and were able to adjust. I am sure you noticed a difference right away.
Scott @ Simplifinances
I’m glad that you were able to share your struggles, but then paying off $100,000+ in debt in 33 months is absolutely incredible! I don’t think you made mistakes, I think those mistakes made you! Awesome work!
Yup, you nailed it. Those mistakes helped provide knowledge and motivation for when we did it right. They still provide motivtion to this day and hopefully others will find a similar motivation in their journey.