Don’t get misled by the title, I am not trying to demean Dave Ramsey or his ideas in any way with this post (perhaps, there will be a different post for that :)). The humble objective is to put forth some features of my debt reduction story and hope that someone in debt might stumble on this, pick up the beneficial parts, and be inspired to think out of the box with regards to his/her debt management approach.
I have mentioned earlier about my three year fight against debt. It was a rather short account of a span of three years and after that post, I never talked about it again. Now, after quite some time, I have decided to spill some more beans about it.
By the way, I didn’t even know who Dave Ramsey was when I went on my own debt reduction program. In fact, I was totally unaware of any of the financial gurus that you generally see floating around many personal finance blogs. Heck, I wasn’t even fully conversant with the concept of “blogging” at the time. So these things, that I am going to list down in the following, are from the point of view of a person (me) who was absolutely oblivious of all the fancy debt reduction ideas.
In this post, I will list some of the features of my debt reduction efforts. I am not claiming that all features were absolutely beneficial towards my efforts. However, I will still list them here because it’s some combination of these features that got me out of debt.
Also, to put things into perspective, without disclosing the real numbers, let me mention that I was facing a 5 figure debt of the order of my annual graduate student stipend.
So, here are some features that I could pin down after some retrospection:
- Comparison lead to realization: Debt in itself was not enough to convince me the seriousness of my situation. What really woke me up was some casual talk with a few fellow students about the balances they carry on their credit cards. Some of them were earning as much as me but had zero balances on their cards. Once, I knew that, it was like “what the heck! how come I have a 5 figure balance while some of them have none?”. I probably realized, that at this rate, I might just become the poorest graduate student on my campus, in spite of a healthy stipend and that didn’t make me feel good. The will to reduce the debt came almost naturally from then on.
- Simple tools for a simple fight: At the time, I wasn’t aware of portals like Yodlee, or softwares like Quicken or Money. Initially, I started putting some numbers together using just a piece of paper and a pencil. When the papers started disappearing on me, I turned to Excel sheets and started recording my statement balances and payments each month. Things were kept really simple.
- No micromanagement: Most personal finance bloggers won’t like this (even I don’t like it much when I think about it now), but that’s how I was doing it. I didn’t keep track of every expense that I was making. I did budget my monthly expenses, but I didn’t keep an account of where every penny was going. Perhaps, it saved me a lot of unnecessary stress. My only goal was to put an arbitrary large amount towards debt every month and make the balances lower than those in the previous month. Period.
- Didn’t stop using credit cards: Yeah, I said it! It’s just that, I was not using the ones with balances on them. I used the ones that had zero balances and paid them off every month. Logic was simple; once I have budgeted my monthly expenses, it didn’t matter whether I paid cash or used credit cards. Cards were convenient and I was using them for the convenience. Another thing is that my debt was not because I was spending with credit cards…my debt was because I was spending like a fool.
- Took time-outs to think about debt: Often I would sit in front of my Excel sheet and work out different payments plans and put my progress into perspective. Sometimes, the resources were there, but I was too tied up (or stressed out) to think about them. A word of caution here: thinking too much about debt might be detrimental instead of being more beneficial; you have to remember there is life beyond debt.
- Sharing helped (I mean thoughts…not debt): This was sort of unexpected. Debt reduction was rapid after I got married. I guess it helps to have someone else’s perspective on your problem once in a while. Gives rise to fresh ideas and renews courage. I guess that’s why it helps reading other people’s blogs and discussing things with them.
- Being consistent: I don’t remember doing anything out of the ordinary in my fight against debt. I didn’t starve myself to save pennies…I was just being sensible in my spending and consistent in my payments. By consistency, I don’t mean being “rigid”..sometimes, you have bend your spending rules (for the benefit of the universe) and you got to do it when you got to do it (in my opinion).
That’s all that comes to my mind right now. All in all, I had a fairly stress free journey to being debt free with the way I did things.
Hopefully, the point is clear by now. You don’t need to prescribe to a third person’s plan for your debt reduction…give it a shot and you may be able to do it effectively under your own terms. It’s really not as complicated as some people make it out to be.
Also, please understand that this is just a suggestion (and not universally applicable); everybody’s debt is different, and depending on the situation, professional advice may sometimes be a better choice.