Suppose you, like me, clicked on a recent story about someone’s “six-figure debt” to discover that it was in the low six figures…and yours is five times more? Reading about that person’s very real desperation and worry, wouldn’t you say to yourself, “Geez. If this person has it so bad — and I don’t doubt they do — then I must have it five times worse.”
It’s only a short trip from that realization to the sinking feeling that maybe, just maybe, you’ll never get out of debt at all.
“Geez. If this person has it so bad — and I don’t doubt they do — then I must have it five times worse.”
Congratulations. You just went from being part of the 300 million Americans who are in debt (and there are only 327 million people in America) to the 1% of debtors, so to speak — because no one is really tracking this — who are in debt so deep that they can’t see it ending anytime soon. My informal definition of Mega-Debt is debt that requires a decade or more to pay down, proportional to your income. For us, that’s about $500,000 (about 30 years of debt, so I ordered the Triple-Mega-Debt). For you, it could be those low six figures, or just five — whatever makes you good and stuck. For you, and me, the routine advice won’t do. There’s not a snowball’s chance in hell that any little tricks, on their own, will cure your debt soon.
My informal definition of Mega-Debt is debt that requires a decade or more to pay down, proportional to your income.
What to do about debt so large? I have thoughts. I believe you stand a much greater chance of sticking to debt payment plans and maintaining hope if you…
Live in “Reward Frugality”
You’ll be giving up an awful lot for an awfully long time, so now is the time to cultivate reward frugality. What do I mean by that? I mean you must begin to view many things you would have taken for granted before — things that are free or very inexpensive — as rewards for your sacrifices. You won’t be eating out, buying coffees, or paying for small conveniences nearly as often (and this will go on for years), so begin to see the short stroll you take, the friend’s phone conversation you’ve enjoyed, the time you spend on your porch with a beer or a homemade coffee, as direct rewards you’re giving yourself. Related to this…
Don’t Let Yourself Get Empty
Check in with yourself often: Are you tired? Mad? Hungry? Thirsty? Don’t wait until you’re so much of any of these that your judgment is clouded and your impulses take over.
Plan for treats when grocery shopping. Buy a good steak or fresh flowers for yourself sometimes. Lay in a stock of snacks and carry them with you. Be liberal with the chocolate, if that’s your thing. Let your reward mentality guide you daily to purchases and decisions that back you up at your low points.
You’ll still have the occasional day when only a big splurge will do — a taxi in the rain, a huge burger and fries down the street — but these will be less frequent, and more easily satisfied by something you’ve already planned for.
Recently, She Picks Up Pennies ran a great post about her debt dropping just below six figures. She mentioned the importance of catching up with other personal finance bloggers whose stories are vastly different from hers, but whose enthusiasm for the work is contagious. That’s where I am — it’s still relatively rare for me to find a PF blogger quite as old as me, let alone someone who is still deliberately taking on new debt during the next two years. Nonetheless, where would I be without my regular reading of other PF bloggers on the debt-free train like Pennies, and the 76K Project, FreeFunFamily, Peerless Money Mentor, Grokking Money, Ben Le Fort, Jennifer Chan, Debt Discipline…and so many more, too many to name.
The point is, find your books, blogs, and perhaps even a circle of friends, and share the struggle and the triumphs often.
Go for Big Debt Wins
Say you have two equal debts, and $550 a month to pay them down. One of them is at a promotional rate of 0% for 18 months, and the other is at 19% with no promotions attached. You have to pay the same minimum payment of $50 to each. After that, it’s your choice. You’ll pay down the higher-interest debt as fast as you can, right?
Not so fast. There are many ways to get around debt, but it’s a mental game, not just numbers. It certainly reduces your overall interest burden to pay the 19% debt down faster, and the math works best that way over time. The pesky truth is more complicated: You may need to throw that extra money at the debt where it will make the biggest, most obvious dent, just to stay encouraged (and influence your credit score).
There are many ways to get around debt, but it’s a mental game, not just numbers.
Take my life— please. At the moment, we have a no-interest debt on our roof repair (the one I won’t shut up about). Every month, I pay $450 minimum and as much more as I can on it, and every penny goes right to principal. I could dedicate that extra to the highest-interest debt, and that makes the most common sense, but I have never been accused of having a lot of common sense, and I love seeing that debt shrink by at least one thousand Big Ones every two months.
When you are in Mega-Debt, sometimes you might have to sacrifice the long-term gain for some short-term impact.
Switch Debt Payment Strategy When Needed
That said, when you’re in really deep debt, you’ll need to reevaluate your strategy periodically, based on varied factors:
- How’s your credit score? You may need to reduce balances faster, which may mean paying off smaller or lower-interest balances first.
- Are you trying for a new loan? Have you ever had a history of late payments? You may need to pay minimums-only for a while just to get a cleaner record of payments.
- Is there a debt that particularly annoys you or triggers you? Maybe that’s the one to focus on first. If it’s YUGE, try setting benchmark goals you can manage, like “$1,000 by March”).
- Have you tried putting cards in the drawer, and still gave in to temptation? Or, conversely, have you done great for a year, but need to deal with an emergency? Try to strike a balance between firm and flexible in your use of credit cards. They are, and always will be, fire to the touch. But, all of us do like our meat cooked.
- Stay alert to changes, financial or mental, that indicate you need to shift your approach. Keep your mind focused and your cool bracelets poised for incoming bullets.
Visualize, Visualize, Visualize
Yes, I am a broken record, but that don’t mean the song’s not good. Fact is, the commitment to long-term debt repayment calls upon you to visualize where you are and where you are going. The journey’s too long and too confusing, otherwise. I’ve already written about how to visualize your debt here and here. At Get Rich Slowly, J.D. has other approaches to suggest.
Whatever you do — a paper chain, a brick wall you’re hacking away at — make your debt tangible so you can live with it now, and beat it once and for all someday.
The point of this, of course, is to track your progress. Mark your wins. I recently went one dollar below $16,000 on our roof loan, and you can bet I celebrated. This is a long journey. Have some frugal parties along with way.
Need to start a budget? Check out these different approaches.
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This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.