Debt Freedom Is Not One-Size-Fits-All

debt freedom

So you are in debt (I am too!). Are you following a plan like something that Dave Ramsey lays out? I know Brad followed it and it was super successful for him.

I have a problem following Dave’s plan for a number of reasons. Number one being motivation.

I am definitely motivated to get out of debt. However, I lose that intense, uber-addicted-to-debt-reduction feeling from time to time.

I do a lot of thinking about the psychology behind debt and money. I’m very intrigued by the differences in how people relate to money. I think there are many different ways to become debt free and you really have to find what works best for you.

Brad and many others have found that following the plan Dave Ramsey sets forth to be a great way to get debt free. And it truly is a great plan. The end result of being debt free comes quicker than most other plans but during the time you are paying on your debt, you will make a great deal of sacrifices. Those who are following a plan like this can usually keep their eye on the prize and that is motivation enough.

But there are some people who need a break in their debt repayment plan. They may choose to go with another plan. One option is to pay off your debt, still live modestly but also put some money aside that is earmarked for something else. Whether it is a new-to-you vehicle, a vacation or a new outfit, saving up for “something” may be enough motivation to keep your head in the game.

I have a friend who has been working very hard at eliminating all of her consumer credit card debt. She finally paid off their last debt and was so happy. Now she’s left with student loans and a mortgage. She is worried, though. They have 3 kids, a home and aging cars. She wonders if it would be wise to save up a 3-6 month emergency fund before diving into her student loan debt, the way Dave Ramsey suggests.

I reminded her that there is nothing wrong with doing something different than DR’s plan. There is a reason that this is called “Personal Finance.” That is because it is PERSONAL to each person. What worked for Brad does not work for me and what is working for me may not work for you.

I am struggling with paying off my debt. I have only just got my snowball to do a little rolling and I’ve been very excited about that. However, I’ve been debating how I’m going to keep moving forward. I have opportunities ahead of me that involve spending money. Money that could be going toward debt. I have held A LOT of guilt over spending that money because I feel like I “should” be doing absolutely everything I can to pay on my debt. I’ve felt like I had to follow what DR says and put every penny towards debt while I continue to pass on some fun times.

I have begun to let go of some of the guilt.

I have come to realize that I don’t have to follow what people like DR say, no matter how much sense it makes. I need to do what works best for me and what will keep me moving forward in the long run. I have two chances to travel coming up in the next 6 months and I’m going to take them. I’m still going to work very hard to pay on my debt and put extra money towards my debt when I can. But I’m also going to continue to put money aside for these trips.

What works for me, may not work for you and that is ok.

The goal for those of us in debt is to NOT be in debt. The route you take to get there can be different for each one of us.

 

Photo Credit: aussiegall on Flickr

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19 Responses to “Debt Freedom Is Not One-Size-Fits-All”

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  1. Monica says:

    OMG Jessica, you just wrote what I have been thinking. I have 4 kids and they are with us only a short time. I want them to have some of the fun things, not spoiling, but more than rice and beans/beans and rice. My oldest is getting ready for college and my youngest is 5. I want to be able to do things while they are all still at home, while moving a bit more slowly on debt.

    • Jessica says:

      I want to take my kids to Disney World next spring. If I wait until I’m debt free, they’ll be too old to enjoy it. I’m starting to think I need to do it as soon as I save the money. I won’t be adding to my debt and I’ll still be paying it off. I just don’t want them to suffer from my own stupidity.

      • JMK says:

        I assume the kids are well award of the normal debt reduction focus in the house – if you’ve been doing it with conviction, it’s unlikely they haven’t seen or felt the impact. A trip is wonderful but needs to be put in context – something like what you wrote above. Perhaps you could propose the Disney trip with the caveat that the budget is $____. Have them help with the research and make the decisions on where to compromise and where going with the frugal option would simply spoil the trip. Maybe renting an offsite place with a kitchen would allow you to prepare meals? Have the older one do some online research for discounted admission passes. Maybe tell them now that they’ll be responsible for any sourvenirs they want and to plan their savings accordingly. No time like now to teach them to save in advance for what they want.

        Also, talk to them about what is important to them about going to Disney. You may think it’s one set of activities when they may have a different list in mind. No point dragging them to a lot of costly attractions they aren’t keen on and missing the ones that would have made their best memories. Put your money into the things they want to do (not the things you think they want to do – big difference). A work colleague of mind just went through this with her kids and it turns out that all they really wanted was a roller coaster, water slide park and a few days in a hotel (video arcade, pool and oddly, to order roomservice once.). She realized Disney was her dream not theirs and instead planned a long weekend to a hotel and themepark within driving distance of home. The kids did all the activites they were after and the cost was a fraction of what they’d been saving for.

        Growing up we went to Disney at least 4-5 times (drove 2 full days each way because flights for 5 were out of the question). I know a lot has changed since I went 30yrs ago. I clearly recall the Pirates of the Caribean and Space Mountain. But those aren’t my first thoughts – I more clearly remember the monorail rides, the hotel pool, the fireworks, and at night a light show on the lake in the middle of the monorail loop. All cheap or free activites but the ones that made the most lasting memories.

  2. Vicki says:

    I agree. There is no one size fits all debt repayment plan. It is as unique as you are.

  3. JoeTaxpayer says:

    Jessica – there’s a time to take a step back from things like “maximizing my lifetime wealth” and thinking about “maximum lifetime enjoyment.” The idea of paying off the debt is important, but at what cost to your own good times with the family? When the kids go off to college, there’s no getting back the time you had them as kids. I’d slow down the debt repayment and do Disney.

    For us, it wasn’t debt, per se, but the rate I was paying it off. As our daughter turned 13, I saw that we had saved enough to pay for college, and was still paying the mortgage to be done by the time she was ready to start. On the other hand, we were also saving a pretty high percent of out income for retirement, 25%+.

    Needless to say, this left a pretty tight budget, which was crazy. Grabbing the latest low rate mortgage (3.5%) and refinancing the balance out to 15 years freed up enough to not have to worry about some of things we all really wanted to do. When she’s off to college and the numbers are more clear (obviously, I might have guessed too high or too low on the cost) we can re-evaluate the remaining mortgage payoff.

    By the way, the David may be helpful to many, but he speaks in absolutes as if he were quoting the gospel. One size doesn’t fit all, and his implication that it’s his way or the path of damnation is a bit offputting to me. One example – if one were disciplined enough to use an envelope type system, only charge what’s available in the budget as cash, she will keep a good credit score, get the extra coverage on purchases, and perhaps decent cash back rewards. My kid’s 529 account is ~ $13,000, funded 100% with rewards. It may very well grow to pay for one college semester. All with a card I pay no fee, and never paid a cent in interest. The David would have me walk away from that. Be well, keep up the great writing.

    • Jessica says:

      Thanks for your reply Joe.

      I feel guilty sometimes when I spend money that could be going towards debt but at this point, I also want to stop saying “no” to my boys all the time. It was really difficult for me to make these types of decisions until I let go of some of the guilt and decided that we needed to live a little bit.

  4. Love your perspective, Jessica! There are so many plans and methods to to eliminate debt, and a person just has to evaluate their options and find the one that works best for them….it may take some trial and error, but once the right plan is found it makes you want to keep at it! I’ve been following you for quite awhile, and know that you have been wanting to do something about your debt for a long time, and now you’re DOING IT! Congratulations!

    • Jessica says:

      I’m still working on the best plan Travis. But I know that it’s not 100 DR’s plan. I also know where I am lacking, I keep working at it, even when it’s REALLY slow.

      Thanks for the support!

  5. You’re right, any debt repayment plan must “fit” the debtor, or it’s probably doomed to failure. I’ve always thought a good motivator is spending time literally visualizing how life would be different if the debt were paid off, or down. But the best–which I think should mean most likely to succeed–path to get there can be quite different for each of us.

    • Jessica says:

      I spend A LOT of time visualizing a debt free life. Man it looks beautiful! But I also know that at the point I’m at right now, an all or nothing plan wasn’t working for me. I had to let go of some guilt and it’s helped.

  6. That is true. But there are principles that everyone trying to get out of debt can and should follow – like cutting expenses (not just “trying” but actually eliminating some), having a plan, making a commitment, and sticking with the plan. Without these, you’ll just end up spinning your wheels or giving yourself an easy out.

    • Jessica says:

      You are so correct Kris. I definitely cut expenses everywhere I can. I don’t have cable and we never eat out anymore. I don’t buy clothing new (heck I won’t even buy myself anything right now even after losing 22lbs. I’ll just wear them loose until I loose so much that they don’t stay up at all!). But I’m committed to paying off debt while still giving my boys some fun from time to time and that includes a, hopeful, vacation in a year.

  7. Gina says:

    Disney has this great thing, a vacation lay a way plan! You pick your vacation, food plans even, and put down a deposit and then pay it off in monthly payments! We did this for our anniversary and had a blast with no debt! You can do this up to two years in advance, hmmm thinking about checking out their website now!

    • Jessica says:

      Oh I LOVE that idea Gina. Ideally we’ll make it happen in 2013 but it could end up being 2014. The kids know about it now so they will definitely be bugging me and that should, hopefully motivated me to keep things progressing smoothly.

  8. Exactly, there’s really no one size fits all. Getting out of debt doesn’t happen overnight, and it’s possibly one of the most stressful things to go through. Pretty easy to get into debt, but hard as hell to get out huh? I don’t think it’s bad to set aside some “fun” money. You gotta reward yourself for your hard work, and there are frugal ways to take a vacation or pamper yourself.

  9. I’ve not really spent a lot of time looking at other people’s ideas of the right strategy to get rid of debt because it’s really so personal. So I have never read DR, or anything like that. I do get inspired sometimes by people like DR or Gail Vaz Oxlade, but I don’t follow them to the book.

  10. Jeff says:

    I just wanted to chime in here. My wife and I started out with over $65,000 in student loan debt. After paying over $10,000 and seeing the principal barely change, we decided to get “Gazelle Intense” and get rid of the debt as FAST as we possibly could. We knew it meant we would have to sacrifice in some areas that might impact our then toddler.

    Instead of buying new toys, we bought used at Mom 2 Mom sales and craigslist. We made the most out of free entertainment like going to the park or just scheduling playdates. Probably the biggest thing we cut back on was eating out – which had the added benefit of helping us eat more healthy meals at home, an example we wanted to set for our child.

    We finally paid off our debt last month following Dave Ramsey’s plan almost to the “T”. It took us 22 months. We literally did eat “beans and rice”, but we mixed it up by making our own pizza, lots of pasta meals, left-overs for lunch, etc. Even now that we’re debt free, grilled cheese with roasted red pepper soup from Trader Joe’s is one of our favorite quick-and-easy dinners.

    I have to say, our son will never know that we were “sacrificing”. He had no idea he had used toys. He plays with them just the same. Never going to a restaurant was normal. He’s 3 now. Obviously, if you have older kids, it’s a little different.

    Even thought we could go to Disney World this year, and we know plenty of parents who are taking their kids, we decided to wait until next year. He’ll be 4 and possibly old enough to actually remember the experience when he’s older. We think he’ll enjoy himself better, and we’ll be able to enjoy it MUCH more knowing that the vacation is paid for.

    You talk about “guilt” about spending when you could be paying off debt. I definitely had that guilt every time we ordered a pizza instead of making it at home, for example. Part of the Dave Ramsey plan is to use those feelings of guilt for motivation. He literally advises you to stop saving for retirement and stop saving for your kids college — temporarily — until you get out of debt. That feeling of guilt encouraged us to pay off the debt as FAST as possible, so that we could get back to meeting those very important obligations (retirement & college savings for kids). That’s the idea though. Dave says that his plan takes on average 18-24 months for most people.

    Being on the other end of it, I’d say it was totally worth sacrificing for 2 years in order to have the rest of our lives debt free! And when I look back, while it seemed difficult at the time, it really wasn’t that bad. I don’t feel like I missed out on anything important.

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