Paying back debt has been a big part of our lives for the last couple years.
We started our debt-free journey about with about $65K of debt. Fast-forward about three years (give or take a month or two) and we’re working away on our last $30K.
It’s fitting that it’s called the debt-free journey because it has certainly been just that.
It has not always been easy or fun, but it would be fair to say we have learned a lot over the course of our debt repayment. This is especially when it comes to our outlook and ideas regarding money.
Alyssa at Mixed Up Money wrote a post talking about finance tips she once loved, but now doesn’t. I found it really interesting. I agreed with a lot of what she had to say and found her “what to do instead” tips useful.
The post made me think about my own beliefs about personal finance and how they have developed and changed over time.
So, loosely inspired by that post, here’s a look at four things I used to believe about paying back debt that I don’t believe anymore.
Things I used to believe about paying back debt that I don’t believe anymore
Reflecting on where I was when we started paying back debt compared to where I am today, there are four things that immediately come to mind when I consider ideas I don’t believe anymore.
A cash-only budget is the best kind of budget
The first book I read when we started getting serious about paying back debt was Financial Peace by Dave Ramsey. This book was recommended to me by a friend; it’s fair to say this book is what really got me fired up to start our debt-free journey.
One thing I really bought into was the whole idea of cash is king. For the first several months of our debt-free journey, apart from auto-paid bills, we were a cash-only house.
I didn’t cut up my credit cards, but the only time they ever came out was for online purchases…and those were few and far between and carefully planned.
But here’s the thing — I hated the cash-only budget.
I hated trying to keep track of it and I hated carrying it on me. And to add insult to injury, I didn’t find that it made me more aware of our spending — it just caused me stress.
What I do instead: I went back to using a credit card based system — and it was the best thing I have ever done for our budget (I wrote about that here, if you’re curious). I treat my credit card like I would treat my debit card — aka, if I don’t have the money available to pay for something, I don’t buy it.
Admitting how much I hated the all-cash budget was difficult — I felt like a failure — but the longer I use credit cards, the more I feel like it was the right choice for me.
(Of course, it likely helps that, the more I learn, the more I pull away from the idea that Dave’s way is the best and only way when it comes to paying back debt. But that’s another post for another time).
Paying back debt should be your only financial priority
I shed this belief pretty quick.
When we first started our debt-free journey, I was still fired up from reading Financial Peace. I loved some of the ideas laid out in the book and I was looking forward to trying them on my own.
But while I’m glad I read it and I think there’s a lot of good stuff there, it didn’t take long for me to decide to make adjustments that better suited our life.
What I do instead: We follow a modified version of the baby steps and it has served us well. Along with making excellent progress on our debt repayment, we have been able to save a more comfortable emergency fund, contribute toward our retirement (at least a little) and…enjoy our lives.
There are some who would disagree with the way we choose to approach our finances but…they’re our finances. Personal finance is, as they say, personal.
The best place to cut is personal spending
When we started paying back debt, I budgeted $20 a pay each for personal spending.
On an average month, this meant we each had about $80 total to spend however we please. Most of the time, I stashed this money away to save for something more long term.
And while I certainly don’t mind doing that — I’m a pretty good saver — it took me longer than I would have liked to admit that maybe $20 was a little on the lean side.
What I do instead: Once we got our smaller debts squared away, leaving only the student loan to focus on, I changed up our budget to allow for more personal spending every month.
Yes, it means it will take longer to pay off our debt, but, as I have often said, there’s no way we were born to just pay bills and die. We work hard for our money — it’s nice to enjoy it from time to time.
I still save the majority of my cash, but it is nice knowing I have the option to spend it, if I so choose.
Tracking your spending isn’t necessary if you have a budget
When we started paying back debt, I read time and time again about the importance of tracking your spending. Still, it’s something I put off doing.
My justification? I have — and stick to — a budget! Isn’t it basically the same thing? Isn’t writing down all the money I spend just pointless duplication?
Then I tried it for a month. And quickly realized it’s not the same thing at all.
Still, tracking my spending is always something I have been resistant about doing despite the obvious benefit.
What I do instead: Panic. Scramble. Basically, not tracking makes keeping my account in order a chaotic experience. That’s why I made tracking my spending part of my 2020 shopping ban. I am hoping this will turn it into a habit, so I can continue doing this in the future.
I’m not surprised my beliefs about paying back debt have changed since we started out debt-free journey.
In fact, I think that’s a really natural thing. One goal I have on the debt-free journey is to stay open to new ideas. This includes challenging my own beliefs.
Is there anything you used to believe about paying back debt that you don’t believe anymore?